What are the drivers of inflation?

We can blame dirty energy for much of the inflation we’re seeing in the U.S. Prices of fuel oil, gasoline and utility gas are soaring faster than any of the other major categories tracked by the Consumer Price Index.

Roosevelt Institute researchers … argue in a new brief that speeding the shift to clean energy would help fight inflation. Fossil fuel prices are inherently volatile, they note, while renewable energy prices are more stable: ?“The Federal Reserve has little power to mitigate inflation driven by fossil fuel prices [so]…the solution to ongoing energy price volatility is a government-led investment in renewable energy production and deployment.”

The electrification of cars and HVAC systems will also help curb inflation, they contend, because electricity is a highly regulated market that is not as vulnerable to price fluctuations as energy commodities. As the chart above shows, electricity prices went up by only 11 percent over the last year — far less than the increases seen in gasoline and utility gas — even though about 60 percent of electricity in the U.S. is currently generated by gas and coal. As the electricity supply is cleaned up, its price volatility will decrease …

https://www.canarymedia.com/articles/fossil-fuels/chart-foss…

Jaak

3 Likes

It’s no great secret - just keep printing fiat currency. There was a paper on French inflation read out to congress in 1876 as a warning on this. Perhaps someone should read it to them again:

Fiat Money Inflation in France

This work began as a paper read before the members of Congress in 1876. The later printed edition also includes a section from Macaulay’s History of England on cheap coinage.

https://oll.libertyfund.org/title/macaulay-fiat-money-inflat…

We are now approaching the hundred year anniversery of the Weimar Republic in Germany and are still making the same mistakes:

The hyperinflation crisis, 1923

The Weimar government’s main crisis occurred in 1923 after the Germans missed a reparations payment late in 1922. This set off a chain of events that included occupation, hyperinflation and rebellions.

https://www.bbc.co.uk/bitesize/guides/z9y64j6/revision/5

As Jean-Baptiste Alphonse Karr wrote in 1849, “plus ça change, plus c’est la même chose”

Divitias,

Without the litany of past run away devaluations of currencies, you are right at this time that the Covid monetary policies has created most of the inflation globally.

This is not a run away depreciation of the USD. The USD is appreciating.

This is swinging from Covid monetary moves to normalization of interest rates, an engaged demand side economic ideology in the US, and a much healthier demand in the US economy.

Heard on NPR this morning a previous vice chair of the FED mention the Reserve Bank has begun this month to sell bonds back into the market.

Something for all of us to remember instead of fretting and dithering like the world has fallen apart because of inflation, in April 2020 the entire global economy stopped. I think the world has done well since considering.

4 Likes

Hi Leap1

Money printing is like being on drugs. You have to go ‘cold turkey’ at some point, or you just keep taking a larger and larger fix until an overdose kills you.

If you think that the current inflation (up to 20% I’d guess) is a price worth paying to rescue us from the financial mess of 2008 then that’s fine. I just don’t agree with this point of view and think that we are heading towards a crack up boom.

I’m with Friedman on the cause of inflation.

“Inflation is always and everywhere a monetary phenomenon.”

Money printing is like being on drugs.

If you have been on that particular drug the US Treasury will be looking for you. I advise against printing your own money. LOL

1 Like

Fiat Money Inflation in France

Fiat paper money: legal tender or fire tinder?

1 Like