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May 14, 2021 - Ron Paul Liberty Report
22:31
Inflation: Cost-push or Demand-pull?

The effects of unprecedented government spending (of money it does not have) and unprecedented Federal Reserve counterfeiting of U.S. dollars are showing up in the economy with rapidly rising prices. You're expected to focus only on the symptoms, and then blame everything except The Fed. The Ron Paul Liberty Report focuses on the root of the problem, along with the solution.

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Inflation's Hidden Costs 00:15:28
Hello, everybody, and thank you for tuning in today to the Liberty Report.
Co-host is Chris Lazzini, and we will be talking today about a little bit of inflation that's hot in the news today.
Chris, welcome to the program.
Great to be with you, Dr. Paul.
Good.
You know, I've talked a bit about inflation.
Matter of fact, inflation and the money supply was the motivation for me to even speak out about political things and economic things way back in the 70s because we had a lot more inflation at that time, and we may still get that much here.
But, you know, it was when Nixon closed the gold window and we went off the gold standard and inflation was roaring.
And although I was practicing medicine at that time, I thought this is a serious problem.
It's going to be around for a while.
And it has turned out to be a major, major economic event.
So August 15th, 1971, in the history of monetary policy, especially dollar policy, is a major event.
But one thing that I did learn early on, even before I got into politics, because I studied Austrian economics, was that definitions are real important.
And Mises made a big point of this, that, you know, inflation is not just prices going up.
Inflation is dealing with the money supply, the increase in the money supply.
It makes a big difference.
But endlessly, even to this day, even to this week, we hear all these arguments, which are the Keynesian arguments.
Blame something else.
Don't blame the money supply.
Because if the money supply is exposed for the real culprit, then it goes right back to the politicians who spend money, run up debts, and then the Federal Reserve accommodates by just printing the money.
Now, I do have a chart here that I hope you can visualize and see to demonstrate what has been happening to the money supply.
And this, to me, is so dramatic.
It's a chart on M1 money supply, and it goes all the way back to 1961.
So you can go back and look at what it was in 1971.
Very, very low.
And it just crept along the bottom of that chart for a long, long time until something dramatic happened a year ago.
And you see, it's the parabolic straight up.
The red line, of course, is the year-to-year percent changes, but it follows the line, which is the black line, and that's in trillions of dollars.
So there's this tremendous increase in the money supply.
But, you know, the story we hear now, because they always want to go back to, you know, distracting from the real arguments, this is transitory.
It's not going to last.
It's temporary.
It's because we've had COVID.
It's because of ABC.
The unions are demanding too much.
The minimum wage is going up.
All that is just distraction because the real culprit is the destruction of money.
And that's what they set in motion back in 1971.
They wanted no restraints on printing money.
And we've been able to maintain that fraud for a long time because we were and continue to be pretty wealthy.
But we were super wealthy then.
We had an empire.
The empire forever has expanded.
We had the military might that was accumulated over the two world wars.
So it's something that has been there.
But our argument has been, Chris, and you've been part of this argument, is this is just temporary.
This is mischief.
This is misleading.
But big events are occurring.
And I think this chart we just mentioned is so dramatic on what's happening.
This cannot be sustained.
And yet the markets had a nervous one day, but they come up and they say this is transitory.
Don't sweat it.
And yelling and the Federal Reserve people, they always say, we can contain it.
We can handle it.
But one of these days, their promises will just fall very flat.
They are falling flat more than ever.
But to me, if anybody is interested in personal liberty and thinks the government ought to be reined in either domestically or on foreign policy, they have to understand money because that's where the real tax is.
There's a lot of taxes, but the real tax is print money, devalue the current, steal the wealth from the people, destroy the middle class, and that's the way they'll pay for it.
So, Chris, this is something that's been with us.
One of these days it will be resolved.
I hope we can influence people to thinking once again about sound money.
Me too, Dr. Paul.
And you are right.
And that chart is so telling.
The Fed and the government have really done it this time.
And they're not going to be able to hide from the consequences because of how extreme their money printing has been over the last year or so.
And it's showing up.
The CPI is rocketing up.
The PPI producer price index is rocketing up.
These are the results of this unprecedented so-called stimulus.
And as we have said over and over, when prices rise, there will always be some other excuse, some other way to focus just on the symptoms, never on the cause, and surely never on the cure, but on whatever the symptoms are in the economy and away from the Federal Reserve.
That's what the media does.
That's what all the professional mouthpieces do.
And the questions are, well, what should politicians do now?
What should the Fed do now?
And, you know, from their perspective, it's understandable.
They want to keep themselves going.
They're not going to shut themselves down.
They're not going to admit that they're the problem.
So the focus will always be on the symptoms.
And that's why, you know, fortunately, we have this show, many others, the internet, to go straight to the root.
Go to the root of the problem, take care of it, and the symptoms will go away.
You'll solve the problem.
You know, Chris, after that episode in 1971, I was sort of shocked that the next day I was attending a Chamber of Commerce meeting, and they were strongly endorsing everything Nixon was doing.
You know, wage and price controls and tariffs to destroy the gold standard and all of these things.
So it was shortly thereafter that the local congressman was coming to town.
I never met him.
I was never involved in politics.
I'd never met anybody in government.
But I went to the meeting and it was a pretty boring meeting.
But at the end, I did get to ask one question.
And all I asked him was for him, the congressman, to define inflation.
And he was very Keynesian.
He says, well, it's like this.
The inflation can be one of two things.
It could be cost-push inflation or demand-pull inflation.
And to tell you the truth, I had not heard that before, but that's classical Keynesianism.
Don't talk about the money supply.
Costs are going up, so that pushes the prices up.
Demand goes up, there's a shortage of something, demands go up, then you have your pull inflation up.
Then, of course, then there's all kinds of other things that they'll make excuses, shortages and hurricanes and whatnot.
But they work very hard at exposing the real truth.
You know, yesterday was an interesting headline because the early part of the week we had the CPI, which was much higher than they expected.
But yesterday was the producer price increase, and they were predicting the predictions are there for various reasons, propaganda or hiding the truth.
But they said they expected it to go up 0.3% month over month.
But it turned out it was twice that much.
So the headline turned out to be U.S. producer prices surge most on record.
So the prices are going up, and that's where the real problem is.
And that's where the consumer is really hurt.
But you know, there's another thing that I think is a bit ironic is, and I've complained about this, Kristen, you've heard me say it so many times, isn't this the stupid thing you ever heard over all these years?
And that's maybe the last decade.
Well, you know, through you two, QE, you know, we need to stimulate things.
We need to stimulate.
And they create, they equate rising prices with an economic growth.
Of course, in a good economy, prices go down because productivity goes up and the value of the money increases.
So it was then that they started this episode way back probably with Greenspan and Bernanke, the whole.
We have to get prices to go up faster.
So our goal is to get 2% increase.
I keep thinking, well, that's stealing 2% of a person's money.
That's the tax.
It's an additional tax.
But I always suspected, and I think we're already at that point now, is they will lament the day when they get their 2% because then when it did hit 2% during the last year, they just denied it or ignored it.
But now they can't ignore it anymore.
It's going up that fast within days and weeks.
And it's going to get much worse.
So I don't think they're going to be talking much about, you know, it's good that we've been urging this and deliberately trying to push the consumer prices up.
They never push up the fact of working towards sound money and living within our means and curtailing government spending, curtailing wars that are fought with inflation.
They never talk about that, but they believe the silliness that if we can just get prices rising, the economy is going to be healthy.
I guess one of these days they might realize it, but I don't think the people I know of in Washington or on the Federal Reserve Board, even if they do know that, they're not going to react properly for it.
You know, Dr. Paul, I wanted to mention the shortages because we saw over this last week with the gasoline.
Once again, in America, lines at the gasoline station.
And, you know, I want for our listeners to always, when you hear or see of shortages, the first question that should come to your mind is at what price?
You know, at $2 a gallon, yeah, there's going to be shortages because there's a crisis.
You're not going to pay pre-crisis prices during a crisis.
So what gas stations should have done, but are too scared to do is they should raise the price of a gallon of gas to $5, $7, $10, and that'll get rid of the shortages.
You'll be able to get gas.
It'll just be very expensive.
But there's no way they're going to do that because they know people want regular prices and they'll go run to their congressman who will come up with some kind of arbitrary price gouging.
So gas stations, they keep it at the regular price or slightly higher and the supplies disappear.
Now, let's think of what would have happened if they raised to $5, $7, even $10.
Everywhere else in the country or even in the world, they would see those prices and think, you know, we could get our supplies over there.
They're selling at $7 a gallon.
We'll still make some money.
And the supplies would rush in.
But if you keep prices down at the $2 pre-crisis levels, no one are going to even attempt to get their supplies in, you know, to satisfy the market demand.
So, you know, they're not going to lose money moving their supplies.
So that's what happens.
You end up with shortages, lines, people punching each other in the face.
And it's all because you don't let the market do what the market is supposed to do.
You know, one excuse that they use is when there's a crisis, when we go to war or there's a recession or something or COVID, that's an emergency, and therefore they have to do something real fast.
We have to have government guidance.
You know, if there's an epidemic, only government knows what to do with epidemic and sort out all the details of who should do what and how many treatments should be available and who's going to pay for it.
But in the midst of a crisis, whether it's a war, I thought about it because I do remember rationing during World War II, and it made things much worse.
But they advocate that.
But the opposite be true.
When there's an emergency, if there is a hurricane, you don't want more price controls.
You want more freedom for prices to go up and adjust and give people incentive to go beyond the call of duty and work all night to provide some of these services.
So they do it exactly the opposite of what they're supposed to do.
And, you know, I think about COVID, COVID now, there's justification to blame the reaction to COVID as part of our economic problem because of all that lockdown.
That was, you know, to diminish the productivity.
And when you think about the subsidies, the very extravagant subsidies to the people that lost their jobs because of government action, they started passing out a lot of money.
So if you're going to subsidize people not working, which was caused by the government, guess what?
You're going to get a lot more of it.
And not only do you get a lot more of it, and there are millions of people out there on the doll, they also say, well, as long as it's coming, why you go back to the job?
And in the midst of all this mess, the government is able to create a situation where people have money, jobs are being offered to them, and they won't even take them.
I would say that's a pretty good example of malinvestment and messing things up.
And the people really under a recession or depression, there's always a chance for a job.
The big problem with it is psychological and it's really tough to achieve because prices should go down.
That's why the Depression was prolonged.
And prices had to be up and wages couldn't go down, but we have pushed wages up.
So that's why the inflation continues.
Instead of wages adjusting, what have we done?
I thought going, there was a time when it was six and seven, $8, they talked.
And we used to kid and say, well, if it's good, why not $15?
We shouldn't have said it because now it's at $15.
But even that isn't very steady because some of the big companies now that have benefited tremendously from this interventionist inflationary system, they're saying, well, we need the people to work.
Real Calamity Ahead 00:03:26
Amazon and Walmart, we need workers.
So we're going to increase it up to $17 and a half.
And it's all, and then the prices that the people have to pay eat up those increases.
So they're on a cycle and they're not about to change it.
The wealthy people who understand it clearly are benefited by it and they're not about to change it.
And it's also tragic that some of the really big corporations, you'll find out that they're really into the woke business.
They're part of wokeism, which means that they are partners with all this cultural Marxist stuff.
So that is a real calamity that we're facing.
And yet, in spite of it, I think the cause for liberty is justified.
I think there's a lot of more people joining.
People are starting to get sick and tired of all this.
And they always get sick and tired of inflation.
But the classic is the people will always say, I don't have enough money.
And so if you want to find out what happens, just go to Venezuela and you find out what happens.
People don't have enough money.
But what they should be saying, I don't have enough purchasing power of my money, and there are no restraints on the government for printing the money.
Then they might get somewhere, but the immediate effect of that is not politically popular.
People, you mean my check would stop or you're going to cut something?
And I understand that.
That's why it's not likely to happen.
That's why we're likely to have a real calamity before we can start all over again.
But right now, when you look at that chart we just showed, it shows it's a dead set to continue the process, but it is going to end just as quickly as it exploded upward.
Very good, Dr. Paul.
I'm going to finish up.
You know, those of us, us, our listeners, we're in the minority, those who believe in free markets, liberty, freedom, individual independence.
Now, that may sound like a daunting position to be in, but it is not, because minorities are the ones who change the world.
Just take a look at what happened in Florida and Texas and South Dakota.
It did not take a majority of governors in the United States to do the right thing and show the rest of the country and even the world that, hey, this is nonsense that's been going on.
You can be living a normal life right now.
There's no need to wait for the bureaucrats and politicians to tell you.
So it just shows you you do not need a majority.
Dr. Paul did the same thing in Congress over and over on every unconstitutional bill, 400 to 1, 400 to 1.
That one meant everything.
So in your small circle, in my small circle, no matter how big or small our circle of influence is, it's important to be the one because by doing so, the potential is there to change everything for the better.
I want to close by talking a little bit about what's going on with coronavirus because it does involve money and deficits and inflation.
And it all comes together because it's all undermining the principles of liberty.
Coronavirus Controversies 00:03:33
But today there was a report out that caught my attention that just represents the stupidity of all this.
The COVID testing has been proven to be totally unreliable.
The medical information that we get using masks and other things, there is no science to what they've done.
And people have suffered.
They put masks on kids who never get the disease.
It's on and on.
You hear of all this silliness.
But then this lockdown, the social distancing, and also the wearing a mask.
I don't believe it has saved any lives.
I think they're useful under special circumstances, such as the elderly being in nursing homes and people being sick this way and their immune system is diminished.
But putting masks on kids and going outdoors, now the CDC is starting to say, you know, it's probably safe now to go outdoors without mask on.
But people are so conditioned that they still want to do it.
But the article that caught my attention today was what happened with the Yankees.
The Yankees, you know, want to go along.
I mean, they want to play by the rules.
And even if the club loses money, we have to do what the rules are, no matter how silly they are.
But the headline today was the Yankees suffer COVID resurgence as eight fully vaccinated players staff test positive.
So here they have everybody tested and eight people coming down.
Now they're going to, you know, what are they going to do?
Are they going to close down the baseball games again?
They were just getting ready to open them up.
But what this points out to me is what's going on here.
I think there's certainly enough reports now of the controversy of the vaccines and vaccines in general should be used very cautiously.
But there's been a lot of complications.
But the testing is unreliable.
You know, the testing to find out how many cases there were, you know, if they did the test one way, there were too many cases that were false.
And now when they wanted to get a lot of cure coming from the vaccines, then there were too many negatives who meant they were curing them.
And so they were manipulating the test.
But they do test this group that we're talking about, the Yankees, they each had three tests done in the last week, you know, trying to verify this.
And I thought, you talk about malinvestment, you know, talk about spending.
And it doesn't cost, and like the president says, it's free.
You don't even have to pay.
We'll give you a glass of beer.
Just go in and get tested so that we can get more control of you.
But the tests and billions of dollars are made over both the testing and the vaccines.
So here they are doing all these testings that probably have no significance.
And in this report, they never mentioned that anybody was sick.
And so that is sort of a distraction from looking for reality.
It's not good medicine.
It's not good politics.
It's not good economics.
So that's what I hope we can do, Chris, continue to promote the cause of liberty and push the cause that shows that sound money certainly is part of that.
And right now, as time goes on, we will become more desperate for making these corrections.
I do want to thank everybody for tuning in today to the Liberty Report.
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