Q: Who's responsible for inflation, Democrats or Republicans?
A: Neither of the above.
Real answer: Corporate greed.
Widespread opinion among conservatives blames liberal government for rising prices, even as these same claimants insist government has no role in price control.
But if government must not, should not, and cannot intervene, how is it that government is at fault?
Historical data show that inflation happens more often when Republicans dominate in government, and Democratic administrations work to slow the pace of rising prices.
Reality check: If any government agency has any influence on price control, it is the Federal Reserve, which controls the amount of money in circulation.
A: Neither of the above.
Real answer: Corporate greed.
Widespread opinion among conservatives blames liberal government for rising prices, even as these same claimants insist government has no role in price control.
But if government must not, should not, and cannot intervene, how is it that government is at fault?
Historical data show that inflation happens more often when Republicans dominate in government, and Democratic administrations work to slow the pace of rising prices.
Reality check: If any government agency has any influence on price control, it is the Federal Reserve, which controls the amount of money in circulation.
That's the definition of inflation: The amount of money is inflated, and prices rise to absorb the increase.
Here's where the Law of Supply and Demand comes in. Prices rise to absorb the amount of money available, and when the cash supply falls, so do prices.
Simplistic example: During an economic downturn and people are out of work and have less cash, prices decline. When more people have jobs, they have more money to spend, so prices rise to absorb the greater supply.
Conclusion: Politicians have little to do with price control. When they succeed in government, they can increase or decrease spending, and over time, eventually, prices may (or may not) change to reflect the amount of cash available.
Similarly, the Federal Reserve can increase or limit the amount of cash available, and eventually, over time, prices will change accordingly.
When an economy grows, politicians take credit. When it declines, they blame the other guy.
The Law of Supply and Demand has not been repealed.
Meanwhile, government can increase spending (boost demand) as a way of causing a rise in production (supply). In turn, this can rescue an economy.
So much for Economics 101. Class dismissed.
Here's where the Law of Supply and Demand comes in. Prices rise to absorb the amount of money available, and when the cash supply falls, so do prices.
Simplistic example: During an economic downturn and people are out of work and have less cash, prices decline. When more people have jobs, they have more money to spend, so prices rise to absorb the greater supply.
Conclusion: Politicians have little to do with price control. When they succeed in government, they can increase or decrease spending, and over time, eventually, prices may (or may not) change to reflect the amount of cash available.
Similarly, the Federal Reserve can increase or limit the amount of cash available, and eventually, over time, prices will change accordingly.
When an economy grows, politicians take credit. When it declines, they blame the other guy.
The Law of Supply and Demand has not been repealed.
Meanwhile, government can increase spending (boost demand) as a way of causing a rise in production (supply). In turn, this can rescue an economy.
So much for Economics 101. Class dismissed.
No comments:
Post a Comment