August’s Price Inflation Soared, and That Means Earnings Fell Yet Again

Source: Mises Institute.

A simple formula helps to explain why steeply rising prices are baked into our current economy:

M = G

where

M is the totality of money, and
G is the totality of goods.

Many factors affect the price of goods, but it is easy to see how changes in the relation of money to goods must produce inevitable outcomes. To illustrate, let M = $10.00 and let G = 10 apples. In that case, $1.00 would be the price of 1 apple. Now let M = $20.00 and let G = 10 apples. In that case, $2.00 would be the price of 1 apple.

Something similar to this has happened in our economy. As the source notes, we have increased M by $5 trillion in just the last two years, but there has been no corresponding increase in G. It is therefore inevitable that prices will continue to rise for the foreseeable future.

“Printing” money is the problem. The solution has two parts. First, stop printing money. Second, produce more goods. Unfortunately, neither part of the solution is politically feasible at present. Wall Street wants more money printing and the current government wants fewer goods.

25 thoughts on “August’s Price Inflation Soared, and That Means Earnings Fell Yet Again

          1. It only includes work CONTINUED under Biden that started under Trump. Similar to the way Trump was given credit for economic growth that started under Obama.

            Your guys can only get it right, the others are ALWAYS the villains.

            Liked by 1 person

          2. RE: “Your guys can only get it right, the others are ALWAYS the villains.”

            Don’t be ridiculous. The source story is a response to the CPI report that just came out. If I had wanted to write about the entire history of monetary inflation in the U.S., I would have done so. I chose, instead, to explain why the current inflation is going to take a long time to clear.

            Biden could do something about it, but isn’t.

            Like

          3. “If I had wanted to write about the entire history of monetary inflation in the U.S., ”

            Your focus (and that of your source) is strictly based on ONE part of this entire economic situation. Cheery picking is still cherry picking.

            Trump inherited an growing vibrant economy, yet no one on the Right took the time to see WHEN that growth actually started. Mises is doing the same thing.

            Liked by 1 person

          4. RE: “Cheery picking is still cherry picking.”

            It is not cherry picking to discuss a government report that was just published. Maybe you want everyone on Earth to share your obsession with Trump, but your expectations and impulses are unreasonable in this instance.

            Like

    1. There is a difference, economically, between expenditures made to offset the losses from a Balck Swan event and continuing expenditures after the economy is already in recovery made to buy votes.

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      1. Exactly. Biden and Democrats are on a “Buy the vote” campaign hoping to target and convince blacks and young people that money is free, who cares, nothing to worry about, nothing to see here. Sad part is some people buy into this trash and then make excuses for the inevitable outcomes like soaring inflation.

        Like

        1. “Biden and Democrats are on a “Buy the vote” campaign “…

          If you think the Republican don’t do the same kind of “buying” ( or being bought is more likely), then you are very naïve.

          The difference is YOU are the buyer.

          Like

      2. “There is a difference . . .”

        Okay, now explain away the effects of multi-trillion dollar tax cuts benefiting only the wealthy when there is already a full employment economy. Go for it. I am sure you can.

        Funny how these “black swan events” only seem to happen when the GOP is in charge.

        Liked by 1 person

          1. “That tax cut benefitted the middle class more than the very rich.”

            The corporate cuts were made permanent, the “middle class” ones are set to expire in 2025, as the act was written.

            The VERY rich and corporations got over 90% of the benefit.

            Liked by 1 person

          2. Just not so.

            “A careful analysis of the IRS tax data, one that includes the effects of tax credits and other reforms to the tax code, shows that filers with an adjusted gross income (AGI) of $15,000 to $50,000 enjoyed an average tax cut of 16 percent to 26 percent in 2018, the first year Republicans’ Tax Cuts and Jobs Act went into effect and the most recent year for which data is available.

            Filers who earned $50,000 to $100,000 received a tax break of about 15 percent to 17 percent, and those earning $100,000 to $500,000 in adjusted gross income saw their personal income taxes cut by around 11 percent to 13 percent.”

            https://news.yahoo.com/irs-data-prove-trump-tax-130007569.html

            Those 100 to 500K earners are typically owners of small businesses who have been building that business for decades.

            The typical American millionaire is first generation wealthy and drives a pickup truck to work. You cut his taxes and he buys another truck and hires another crew.

            Like

          3. “That tax cut benefitted the middle class more than the very rich.”

            That is total bullshit.

            Per the Congressional Research Service the economic benefits predicted for the Trump tax cuts did not materialize because “the economy was at full employment and most of the tax cut went to businesses and higher income individuals who are less likely to spend the increases, a small demand-side effect would be expected.”

            https://tinyurl.com/43k7hamj

            https://www.theguardian.com/business/2019/oct/09/trump-tax-cuts-helped-billionaires-pay-less

            https://www.americanprogress.org/article/tcja-2-years-later-corporations-not-workers-big-winners/

            Liked by 1 person

          4. “Just not so”

            For someone who seems to think he knows quite a lot you seem to not understand basic math. Nothing you cite refutes the point that 90% of the benefits went to the richest people and corporations. No matter the benefit that some slice of Mom and Pop businesses received, it is dwarfed by the BILLIONS that people at the top got.

            Like

          5. Duh

            The very rich pay nearly all the income tax, so itis impossible to structure a tax cut that does not reduce their taxes too, and even if the percentage cut for them is much smaller, they pay so much that the total change favors them.

            But as a share of profit, the guy in the pickup truck got the greatest benefit.

            If you really want to target the rich, tax spending instead of income.

            Like

          6. “Duh”

            Just cannot admit when you are wrong. Adam stated a fact. You said it was “just not so.” You were wrong. So now you change the definitions.

            The real point is that Trump – the new champion of the working class according to you – forced through a huge tax cut with almost nothing in it for the working class. That was a feature, not a bug.

            Like

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