A Simple Example
Imagine a town where the baker made twelve loaves of bread a week. Ten of the loaves were sold each week to ten workers from the town factory who earned four dollars per week each. They all felt they were paying a fair price and happily paid it.
The town happened to be located in a district with a very unpopular governor who was up for reelection. The governor decided he would give all the factory workers a raise by printing more money and giving each factory worker eight dollars a week instead of four dollars. The factory workers were thrilled. For several weeks, they made eight dollars a week but still paid one dollar for bread.
The baker learned that the factory workers were now making twice as much so he figured he deserved a raise as well. He doubled the price for a loaf of bread to two dollars. Each worker now paid two dollars for the same loaf that used to cost one dollar, but they were not bothered because they still paid the same proportion of their income for a loaf of bread.
Not everyone worked at the factory. Two of the loaves were sold to farm families who did not get the governor’s raise. That same two dollar loaf of bread now took up half of their income. Needless to say, giving money to the factory workers resulted in the farmers being seriously hurt economically.
Understanding the Money Supply
When the government prints more money (increases the money supply) the relative market value of goods does not change. That loaf of bread still holds the market value of 25 percent of the workers wage, but for those on a fixed income the resulting increase amounted to 50 percent of the farmer’s earnings.
This is a simple example. When Congress overspends and dumps more money into the economy, the value of goods and services remains the same to the overall relative money supply. In the short term, it just seems like progress. If you rented apartments and you saw everyone getting a raise, wouldn’t you increase the rent so that you got a raise as well? This is a concept that the progressive left does not understand.
As a result of fighting the recession caused by the COVID pandemic, the U.S. government has flooded the American economy with a historic amount of U.S. dollars created through trillion dollar stimulus programs. The growth rate of all the dollars in circulation soared a historic record 27 percent in 2020-2021. That is the biggest jump in the money supply in America’s history. That is bigger than the Financial Crisis of 2007-2008 (10%), bigger than World War II (18%), and bigger than FDR’s stimulus to fight the Great Depression (10%). Combined with over regulation in key sectors like energy, the result is out of control inflation that will likely get worse. Unfortunately, any further stimulus or, government deficit spending, can only make matters worse.
Americans Must Vote for Change
The important things that voters must realize is that every penny our government spends at this point won’t improve the situation. Yes, the sectors who receive all the free money will be thrilled. Americans at the bottom, who’s income is relatively fixed will suffer more and more with every new dollar created. The progressive left is forcing greater poverty on the most impoverished and neutralizing any progress made by the middle class. It is time to vote for sound fiscal policies and not for feel good giveaways.