Opinion from a Libertarian ViewPoint

No, Sen. Warren, Greed Is Not Causing Inflation | Mises Wire

Posted by M. C. on December 21, 2021

If evil corporations are to blame for rising prices in 2021, as Elizabeth Warren says, I imagine that they were magnanimous and generous corporations when there was low or no inflation, right?

Daniel Lacalle

Senator Elizabeth Warren recently stated that rising prices were due to corporations increasing their profits. “This isn’t about inflation, this is about price gouging for these guys.” It is simply incorrect.

No, corporations have not doubled their profits, and rising prices are not due to the evildoings of businesses. If evil corporations are to blame for rising prices in 2021, as Elizabeth Warren says, I imagine that they were magnanimous and generous corporations when there was low or no inflation, right?

Inflation is the tax of the poor. It destroys the purchasing power of wages and engulfs the little savings that workers accumulate. The rich can protect themselves by investing in real assets, real estate and financial, the poor cannot.

Inflation is not a coincidence, it is a policy.

The middle class and the salaried workers not only do not see the advantages of inflation, but they also lose in real wages and also in their future prospects. Robert J. Barro’s study in more than one hundred countries shows that an average 10 percent increase in inflation during one year reduces growth by 0.2–0.3 percent and investment from 0.4 percent to 0.6 percent in the next year. The problem is that the damage is entrenched. Even if the impact on gross domestic product is apparently small, the negative effect on both growth and investment remains for several years.

Despite the message from central banks, which repeat that inflation has temporary components and is fundamentally transitory, we cannot forget:

Inflation will not go down in 2022, according to central banks. Inflation will go up less in 2022 than in 2021. It is not the same.

When some agents speak of “transitory” inflation, they mean that it will rise less in 2022 than in 2021, not that prices will fall.

“Transitory inflation” is 6 percent in 2021, 3 percent in 2022, and 2.5 percent in 2023. That is, more than a 12 percent increase in three years. How many of you are going to see your wages and earnings rise 12 percent in three years?

The great beneficiary of inflation is the government, and Ms. Warren knows it. That is why she defends inflationary monetary and fiscal policies. On the one hand, receipts from the monetary taxes of captive economic agents increases (value-added tax, personal income tax, corporate taxes, indirect taxes), and on the other hand, the government’s accumulated debt is partially “devalued.” But public accounts do not improve because gross domestic product slows down; the structural deficit remains high and, therefore, absolute debt does not fall.

How many of you are going to raise your salary 12 percent in three years?

Deficit-spending governments see real expenditures go up and the structural deficit does not fall.

Wages and pensions do not rise with inflation. Almost no one will see a 12 percent rise in three years in their work compensation. Real median wages in the United States have plummeted due to inflation, according to St. Louis Fed data.

Inflation is not the Consumer Price Index (CPI). Inflation is the loss of purchasing power of the currency that leads to a persistent rise in most prices regardless of their sector, demand, supply, or nature, and is a direct consequence of the wrongly termed expansionary monetary policy. Inflation is a direct cause of currency debasement.

CPI is a basic basket calculated with estimated weights between goods and services. In it there are prices of nonreplicable basic products that rise much more than the average and that we consume every day (food, energy) and the basket is moderated with services and goods that we do not consume every day (technology, leisure).


Prices do not rise in tandem by 2–5 percent because of a coordinated decision from all businesses in all sectors. It is a monetary phenomenon.

The good thing for the most interventionist politician is that the government is the most benefited by the rise in prices but it can blame others and, on top of that, present itself as a solution by making payments in increasingly useless paper currency.

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