Kevin O'Leary on inflation: you printed $7 trillion in 30 months.  What did you think would happen?  |  Jon Miltimore

Kevin O’Leary on inflation: you printed $7 trillion in 30 months. What did you think would happen? | Jon Miltimore

Americans have been dealing with high inflation for 40 years and there is no shortage of talk about it. It’s the number one question on the minds of Americans heading into midterms, and every day on TV and in the newspapers pundits debate how long this decision will take and decide who is to blame.

What’s most amazing amid the flurry of news is how lacking commentary is. Although it is widely believed that the United States is experiencing dangerously high inflation, partisanship and ideology have polluted the basic economy.

Progressive politicians like Robert Reich and Senator Elizabeth Warren incessantly tweet that “corporate greed” is to blame, an idea that even Democratic economists have summarily dismissed. President Joe Biden, meanwhile, blamed Vladmir Putin. Republicans, on the other hand, have always claimed that Joe Biden was the inflation culprit.

All of these explanations are entirely or mostly false.

While it’s true that Putin and Biden deserve blame, especially in terms of high energy prices, there seems to be an unspoken bipartisan consensus to ignore the elephant in the room: unprecedented money printing. of the Federal Reserve.

One person who doesn’t play along is Kevin O’Leary, the Canadian entrepreneur and investor who appears regularly on ABC shark tank. Speaking to journalist Daniela Cambone, O’Leary explained bluntly why Americans are experiencing the highest inflation in generations.

“The printing presses have gone mad,” O’Leary said. “That’s why we have inflation in the first place.”

By printing presses, O’Leary talks about the Federal Reserve. The central bank has been expanding the money supply for decades, and the clip has accelerated in recent years. Nothing, however, has compared to the monetary expansion that has occurred during the pandemic, which Fed Chairman Jerome Powell recently admitted in a 60 minutes interview with Scott Pelley.

“You flooded the system with money,” the CBS reporter said.

“Yeah, we did,” Powell replied.

This is where O’Leary is coming from. “Flooding the system with money” is what drove inflation to historic highs, and the result has always been evident.

“Despite all the talk of inflation, you print $6.72 trillion in thirty months, what the hell did you think was going to happen?” said O’Leary. “Of course there will be inflation.”

O’Leary’s figures are not wrong. Federal Reserve data shows that as of August 2019, there was $14.9 trillion in total in circulation. In January 2022, there were $21.6 trillion.

In other words, more than 30% of the dollars in circulation in January 2022 had been created during the previous 30 months.

What is Inflation?

Money creation is the obvious driver of price inflation, a concept most Americans have at least a vague understanding of because we see it all around us today. Prices are rising for almost everything, and a lot.

But is rising prices alone proof of inflation? Prices always change, after all. Sometimes they rise and sometimes they fall; often this has nothing to do with money printing, but simply reflects changes in supply and demand.

This is what makes inflation difficult to define, and in fact there are two definitions for it.

For centuries, inflation has been defined primarily as an increase in the money supply. Basic economics holds that if you increase the money supply without increasing goods and services, prices will rise. So that was the definition of inflation: an increase in the money supply.

Twentieth-century economists, however, added a second definition, calling inflation a “general and sustained increase in prices”. We can see from this definition that what separates inflation from simple price increases is that they are large and supported.

Some economists prefer the old definition of inflation, and Henry Hazlitt, author of Economics in a lesson, can help us understand why.

“Inflation is an increase in the quantity of money and credit. Its main consequence is soaring prices,” Hazlitt explained. “Therefore, inflation – if we mistakenly use the term to refer to the rise in prices themselves – is caused solely by the printing of more money. Government monetary policies are entirely responsible for this.

Hazlitt argues that rising prices are the result inflation, which is an increase in the money supply. That’s why some economists don’t like the new definition of inflation.

“I prefer the old definition,” Joseph Salerno, an economist at Pace University, explained during a conference on hyperinflation. “I think it’s more useful.”

It’s not hard to see why some economists consider the traditional definition of inflation to be superior. He goes straight to cause price increases (an expansion of the money supply), while the new definition focuses on a symptom of inflation (“a general and sustained increase in prices”).

This second definition is much less clear, which might be precisely why some people love it.

Nobody wants to be blamed for inflation, after all, and according to the first definition, blame will always lie somewhere: the people who control the money supply and, to a lesser extent, politicians, big banks and bureaucrats. who support the Fed and benefit directly from its largesse.

That’s a lot of pressure for central bankers and politicians. It is much easier to say that Vladmir Putin is mainly responsible for high prices, or “greedy companies”, or Joe Biden’s Build Back Better policies.

Inflation: a silent killer

Now, some will tell you that if you’re under 60, it’s probably the first time you’ve experienced inflation, but that’s not true. Usually inflation is just low enough that people don’t notice it as much.

For example, government data shows that a dollar printed in 1990 had already lost 50% of its purchasing power by 2021. This is why inflation is often referred to as the “silent killer”.

Yet history shows that inflation often does not remain silent. It persists and grows, and over time it becomes a destroyer of civilizations.

“I don’t think it’s an exaggeration to say that history is largely a history of inflation, usually inflations designed by governments for the gain of governments,” the prize-winning economist once observed. Nobel FA Hayek.

This is why Hayek believed that the only way to have sound money was to get it out of the hands of central bankers and planners.

“I don’t believe we’ll have any good money again before we take the thing out of government hands,” Hayek said.

This is precisely why there has been such excitement around decentralized currencies like Bitcoin and Ethereum.

Whether cryptocurrencies can supplant the dollar remains to be seen, but one thing is clear: the main cause of inflation is not a boogeyman. It’s not a Russian dictator, corporate greed or bad legislation. 1

The main cause of inflation is printing presses, exactly as Kevin O’Leary says.

A version of this article originally appeared in The Epoch Times.

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