{"id":1777767,"date":"2022-12-16T12:00:22","date_gmt":"2022-12-16T17:00:22","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1777767"},"modified":"2022-12-16T12:04:06","modified_gmt":"2022-12-16T17:04:06","slug":"treasury-sec-yellen-blaming-consumers-for-inflation-is-the-governments-latest-attempt-to-deflect-blame-for-its-policies","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/treasury-sec-yellen-blaming-consumers-for-inflation-is-the-governments-latest-attempt-to-deflect-blame-for-its-policies\/","title":{"rendered":"Treasury Sec Yellen Blaming Consumers for Inflation Is the Government&#8217;s Latest Attempt to Deflect Blame for Its Policies"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">36<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Ftreasury-sec-yellen-blaming-consumers-for-inflation-is-the-governments-latest-attempt-to-deflect-blame-for-its-policies%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1777767&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>A few weeks ago, US Secretary of the Treasury Janet Yellen appeared on the <em>Late Show With Stephen Colbert <\/em>to discuss a range of issues both political and personal.<\/p>\n<p>The most widely <a rel=\"nofollow\" href=\"https:\/\/www.cnn.com\/2022\/12\/01\/economy\/yellen-colbert-signature-currency\/index.html\">reported <\/a>moment in the interview came when Yellen <a rel=\"nofollow\" href=\"https:\/\/www.cnn.com\/videos\/business\/2022\/12\/01\/janet-yellen-signature-colbert-cprog-orig-fj.cnn-business\">talked <\/a>about <a rel=\"nofollow\" href=\"https:\/\/www.thedailybeast.com\/treasury-secretary-janet-yellen-tells-stephen-colbert-she-practiced-her-signature-for-bills\">practicing <\/a>her signature (don&#8217;t ask me why this is newsworthy, I have no idea). However, a significantly more important moment has not gotten the attention it deserves.<\/p>\n<p>When asked by Colbert to <a rel=\"nofollow\" href=\"https:\/\/www.foxnews.com\/media\/yellen-blames-americans-splurging-pandemic-record-high-inflation\">explain<\/a> the reasons behind the worst inflation the US has experienced in 40 years, the former Federal Reserve chair blamed it primarily on rising consumer spending\u2014Americans &#8220;splurging&#8221; on goods\u2014at the start of 2021 once the Covid-19 lockdowns were lifted. This, compounded with supply chain issues and the war in Ukraine can sufficiently explain inflation, Yellen claims.<\/p>\n<p>But can it really? Let\u2019s take a closer look.<\/p>\n[embedded content]\n<h2>The Real Reason For Inflation<\/h2>\n<p>Yellen&#8217;s explanation is not wholly inaccurate; it is true that consumer spending rose above pre-pandemic levels at the start of 2021 and continued to rise at a notably fast rate for many subsequent months\u2014which puts upward pressure on prices. At the same time, this is in no way a complete explanation of the <a href=\"https:\/\/fee.org\/articles\/how-inflation-drinks-your-milkshake\/\">inflation<\/a> we are seeing now.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/12\/janet20yellen20inflation20article_76ba0701-d4b6-465b-905f-d59c479e7579.png\" alt=\"\"   style=\"display:none\"><\/p>\n<p>Yellen\u2019s explanation does not capture inflation\u2019s primary culprit, both in this case and historically: expansionary monetary policy. From February 2020 to February 2021, <a rel=\"nofollow\" href=\"https:\/\/tradingeconomics.com\/united-states\/money-supply-m2\">the money supply as measured by M2<\/a> (the broadest measure of the money supply) increased by 27 percent. It increased by another 11 percent from February 2021 to February 2022. This means that, over the first two years of the Covid pandemic, the money supply increased by 41 percent. To put that in perspective, from 2010 to 2019, this measure of the money supply <a rel=\"nofollow\" href=\"https:\/\/www.wsj.com\/articles\/the-money-boom-is-already-here-11613944730\">rose<\/a> by 5.8 percent annually.<\/p>\n<p>In a <em>60 Minutes<\/em> interview, Chairman of the Federal Reserve Jerome Powell <a rel=\"nofollow\" href=\"https:\/\/twitter.com\/miltimore79\/status\/1483188552175271939\">replied<\/a> &#8220;Yes, we did,&#8221; when asked if he simply &#8220;flooded the system with money&#8221; during the pandemic.<\/p>\n<p>The consequence of such a drastic rise in the money supply is clear: a drastic rise in inflation.<\/p>\n<h2>The Evidence<\/h2>\n<p>The reason this is the case should be intuitive (increasing the amount of money in the economy boosts the relative demand for goods and services, which puts upward pressure on prices) but it can also be demonstrated theoretically and examined empirically using what is known as <a rel=\"nofollow\" href=\"https:\/\/web.mit.edu\/course\/15\/15.012cd\/attach\/Rec-9Feb01.pdf\">the quantity theory of money<\/a>. This theory has roots that can be <a rel=\"nofollow\" href=\"https:\/\/en.wikipedia.org\/wiki\/Quantity_theory_of_money#:~:text=In%20monetary%20economics%2C%20the%20quantity,in%20circulation%2C%20or%20money%20supply.\">traced<\/a> back hundreds of years but remains as <a rel=\"nofollow\" href=\"https:\/\/economictimes.indiatimes.com\/definition\/quantity-theory-of-money\">relevant <\/a>as ever today, with most economists accepting its core insight as accurate.<\/p>\n<p>The quantity theory of money is based on the \u201cequation of exchange\u201d: MV=PY, where M is the quantity of money, V is the velocity of money (the average frequency at which a unit of money is used to purchase goods during a given period), P is the average price level, and Y is real GDP.<\/p>\n<p>If the value of one side of the equation rises or falls, there must be a similar shift on the other side. Based on this, we can understand that there is a positive relationship between money supply and price level, all other variables held constant.<\/p>\n<p>This is particularly true if we accept that a nominal variable such as money cannot influence a real variable like GDP (Y); it would mean that the entire impact of a rising money supply falls on price level, rather than price level <em>and <\/em>real GDP).<\/p>\n<p>In the context of the economic developments since February 2020, it becomes clear why we now see inflation. M rose dramatically for a two year period; however, it initially did not cause a hike in the left side of the equation (MV) because of a decline in V at the start of the pandemic. But once V inevitably adjusted back to baseline as restrictions were lifted, MV rose and an increase in the left side of the equation (PY) was necessary in order for the identity to hold. The spike in price level (inflation) following a rapid rise in the money supply and a return of other variables to their baseline could have easily been predicted using this theory and equation.<\/p>\n<p>Put simply, as the supply of any good, including money, increases, the value of that good will fall relative to the value of other goods. In other words, creating more money means money will have a lower purchasing power than if the money was not created.<\/p>\n<p>That this is the proper explanation for inflation, and that the quantity theory of money remains valid, is borne out empirically. The graph below\u2014created by two economists at Johns Hopkins University and <a rel=\"nofollow\" href=\"https:\/\/www.wsj.com\/articles\/powell-printing-money-supply-m2-raises-prices-level-inflation-demand-prediction-wage-stagnation-stagflation-federal-reserve-monetary-policy-11645630424\">presented<\/a> in the <em>Wall Street Journal<\/em>\u2014shows expected inflation based on the quantity theory of money equation (MV=PY) plotted next to actual inflation as measured by the GDP deflator over the past 60 years. The extent to which the two track is striking. The only deviation from the relationship took place at the start of the Covid-19 pandemic; but, by the middle of 2021, the equation of exchange was once again a near perfect predictor of inflation. This suggests that the quantity theory of money certainly reflects the real world workings of the economy in that price level is heavily influenced by money supply. It thus vindicates the proposition that the Federal Reserve\u2019s expansionary monetary policy is the primary reason for inflation.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/12\/janet20yellen20inflation20article_2c8d6d76-5920-4a5c-a24b-a2347a3784d7.png\" alt=\"\" \/><\/p>\n<p>As a final note, it should be mentioned that all of this was exacerbated by expansionary fiscal policy. At the same time that the money supply was increasing, politicians in Congress passed several stimulus bills\u2014nearly all of them topping a trillion dollars.<\/p>\n<p>Astonishingly, these bills did not stop when inflation began. <a rel=\"nofollow\" href=\"https:\/\/www.google.com\/search?q=american+rescue+plan&#038;rlz=1C1GCEA_enUS1035&#038;oq=american+rescue+plan&#038;aqs=chrome..69i57j0i512l2j0i395i512l7.4559j1j7&#038;sourceid=chrome&#038;ie=UTF-8\">In March 2021<\/a>, Democrats passed, and Joe Biden signed, the $1.9 trillion American Rescue plan which sent billions of dollars in direct stimulus checks. Then, in August 2022 the so-called Inflation Reduction Act was passed, which <a rel=\"nofollow\" href=\"https:\/\/www.mckinsey.com\/industries\/public-and-social-sector\/our-insights\/the-inflation-reduction-act-heres-whats-in-it\">added<\/a> more than $500 billion in new spending and tax breaks. Insofar as an increasing money supply enables increasing government spending, it puts upward pressure on prices, which means the inflation we see today really was a team effort between the Federal Reserve and Congress.<\/p>\n<h2>The Art of Shifting Blame<\/h2>\n<p>It should be self-evident that the explanation given above for inflation is not one that the people in charge of monetary and fiscal policy would be happy with. The reason is simple: it suggests they are culpable for the inflation we have experienced.<\/p>\n<p>The first response was that it was merely \u201ctransitory.\u201d Jerome Powell <a rel=\"nofollow\" href=\"https:\/\/www.forbes.com\/advisor\/investing\/transitory-inflation\/#:~:text=According%20to%20Powell%2C%20soon%20everything,Powell%20said%20in%20March%202021.\">claimed<\/a>, in March 2021, that \u201cthese [are] one-time increases in prices.\u201d Yellen concurred <a rel=\"nofollow\" href=\"https:\/\/www.youtube.com\/watch?v=Z1anoZkxHMg\">saying<\/a>, \u201cI really doubt that we\u2019re going to see an inflationary cycle.\u201d Former White House Press Secretary Jen Psaki <a rel=\"nofollow\" href=\"https:\/\/www.youtube.com\/watch?v=Z1anoZkxHMg\">told<\/a> reporters that inflation was only going to have \u201ca temporary, transitory impact.\u201d<\/p>\n<p>All of these claims turned out to be completely untrue, as even those who pushed that idea at the start have now <a rel=\"nofollow\" href=\"https:\/\/www.cnn.com\/2022\/05\/31\/politics\/treasury-secretary-janet-yellen-inflation-cnntv\/index.html\">recognized<\/a>.<\/p>\n<p>Then, politicians including, but <a rel=\"nofollow\" href=\"https:\/\/twitter.com\/SenWhitehouse\/status\/1526293222812798978?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1526293222812798978%7Ctwgr%5E17ca1e3570a4c845a4e52776daf923e646915fa8%7Ctwcon%5Es1_&#038;ref_url=https%3A%2F%2Fwww.washingtonexaminer.com%2Fopinion%2Fwhy-elizabeth-warrens-new-anti-inflation-plan-would-fail-miserably\">not limited to<\/a>, Senators <a rel=\"nofollow\" href=\"https:\/\/twitter.com\/SenWarren\/status\/1525947232331128832?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1525947232331128832%7Ctwgr%5E17ca1e3570a4c845a4e52776daf923e646915fa8%7Ctwcon%5Es1_&#038;ref_url=https%3A%2F%2Fwww.washingtonexaminer.com%2Fopinion%2Fwhy-elizabeth-warrens-new-anti-inflation-plan-would-fail-miserably\">Elizabeth Warren<\/a> and <a rel=\"nofollow\" href=\"https:\/\/www.sanders.senate.gov\/op-eds\/our-economic-crisis-isnt-inflation-its-corporate-greed-and-the-gop-will-only-make-that-worse\/\">Bernie Sanders<\/a> jumped on the idea that \u201ccorporate greed\u201d was the real reason inflation was rising. <a rel=\"nofollow\" href=\"https:\/\/fee.org\/articles\/more-alarming-inflation-data-undercut-the-progressive-greedflation-narrative\/\">As Brad Polumbo points out<\/a>, though, the issue with this talking point is twofold: <strong>1)<\/strong> \u201ccorporations are no more \u2018greedy,\u2019 aka profit-seeking, than they were 5 years ago or 10 years ago, when inflation wasn\u2019t surging\u201d and <strong>2)<\/strong> producer prices have risen more than consumer prices, suggesting \u201ccompanies haven\u2019t jacked up prices to even fully match the increase in their costs, let alone exceed them.\u201d<\/p>\n<p>The \u201cgreedflation\u201d argument amounts to nothing more than a politically-motivated conspiracy theory.<\/p>\n<p>The White House has also taken advantage of Russia\u2019s war on Ukraine to dub inflation \u201cPutin\u2019s price hike.\u201d Nevermind the fact that inflation \u2014 including gas prices \u2014 were already up prior to Russia\u2019s invasion, plenty of people went along with this line of argument anyway. This supply shock caused by the war would also be accounted for in the real GDP term of the equation of exchange. Since real output hasn\u2019t yet fallen significantly in the US, it\u2019s unlikely that this is the primary cause of inflation. <a rel=\"nofollow\" href=\"https:\/\/www.cato.org\/blog\/yes-russias-war-ukraine-did-raise-price-gasoline-0\">It is true<\/a> that the invasion has made inflation worse, but it is certainly not the cause of inflation.<\/p>\n<p>And now, with Yellen\u2019s recent interview, it seems that the narrative has shifted once again\u2014to blaming inflation on Americans for spending too much.<\/p>\n<p>There is a pattern here: no matter what happens, technocrats, bureaucrats, and politicians find a way to blame everything and everyone\u2014except for their own policies and actions\u2014for the situations we find ourselves in. This is true regarding inflation; this is true regarding school closures and subsequent learning loss; this is true regarding failed Covid-19 lockdowns.<\/p>\n<h2>Milton Friedman\u2019s Warning<\/h2>\n<p>Nobel Prize winning economist Milton Friedman could have (and did) predict this precise sequence of events almost 50 years ago.<\/p>\n<p>He <a rel=\"nofollow\" href=\"https:\/\/www.heritage.org\/budget-and-spending\/heritage-explains\/the-real-story-behind-inflation#:~:text=Milton%20Friedman%20famously%20said%3A%20%E2%80%9CInflation,spending%20priorities%2C%20and%20recently%20the\">said<\/a> that &#8220;If you listen to people in Washington (&#8230;) they will tell you that inflation is produced by greedy businessmen or it&#8217;s produced by grasping unions or it&#8217;s produced by spendthrift consumers.&#8221;<\/p>\n<p>As we have seen, this is certainly still the case today. However, Friedman points out that the core issue with those ideas is that &#8220;neither the businessman, nor the trade union, nor the [consumer] has a printing press in their basement on which they can turn out those green pieces of paper we call money.&#8221;<\/p>\n<p>So, what is the cause of inflation? Friedman argues: \u201cInflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.\u201d<\/p>\n<p>There is no better description of the period between February 2020 and February 2022. The government first shut down production during lockdowns\u2014with residual effects being felt for a substantial period of time afterward due to the friction inherent in our economy\u2014while simultaneously increasing the money supply at staggering rates.<\/p>\n<p>The question we should be asking those in charge is simple: what other outcome could there have been other than rising inflation?<\/p>\n[embedded content]\n","protected":false},"excerpt":{"rendered":"<p>A few weeks ago, US Secretary of the Treasury Janet Yellen appeared on the Late Show With Stephen Colbert to discuss a range of issues both political and personal. The<\/p>\n","protected":false},"author":1,"featured_media":1777770,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[547],"tags":[7900,6442,9668,5458,8891,9669,5525,5708,4600,3819,3778,5286],"class_list":["post-1777767","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-bongino-report","tag-attempt","tag-blame","tag-blaming","tag-bongino","tag-consumers","tag-deflect","tag-governments","tag-inflation","tag-policies","tag-report","tag-treasury","tag-yellen"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1777767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1777767"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1777767\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1777770"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1777767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1777767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1777767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}