Page 20 - THE SOUTH CHINA BUSINESS JOURNAL
P. 20
C. TODAY
Corporate Greed Is Not the Cause of
Inflation, Here’s Why
By U.S. Chamber of Commerce
“DWhat’s hesappipteening: The idea that corporate This is not to criticize the Fed’s COVID-era
monetary policy. It had to do what was
greed, orth“geremedafnlaytion,” is the cause of necessary to stop a financial crisis while the
perasristitcelnetsinflation is making the rounds again, world dealt with a pandemic. Unfortunately,
ssoucdiht’estchwrionyrginthagsre“gitreereadtifnlagtitohne.”obvious: there is no the timing for unwinding those actions got
away from the Fed for a variety of reasons,
corporate including how long the virus lingered and the
The“gfraecetds:flIantfliaotnio,”n is caused by clear and well- size and timing of the fiscal response to COVID.
undtheresrteooisd economic factors that stem from
tsouopnpmolytahnainynddgodmlelamorsarnechda. sPirnicgetsoroisfeewwhgeonodwseahnadve Business’ response: Businesses did not
sergvioceins.gTohenrethisannothing more complicated to cause the reduction in supply, the increase in
thethsteorsyimthpanlethat. demand, or the growth of the money supply.
They naturally reacted to the changes in
facts of the market prices that resulted from those things.
gDouoeridcnsogantnhodemspeyar.nvdiceems icco, uwpelehdadwiathlimanitiendcrseuapspelyinof
Businesses have no choice but to raise prices
demand. Prices rose as a result, but that effect when the costs of their inputs rise, which they
was short-lived. It faded once the economy have substantially, including their biggest
began reopening. expense – labor. If they don’t raise their prices
to accommodate these changes, they would
The Fed’s role: The more long-lasting effect see their margins shrink and could ultimately
of inflation is the Federal Reserve’s (the Fed) start losing money. They raise prices to offset
expansion of the money supply. This expansion these effects that would otherwise jeopardize
of the money supply was well above any increase their businesses.
in the size of the economy, hence too many
dollars facing too few goods and services. The Assuming that inflation exists because
persistent inflation we are experiencing now businesses raise prices gets the causality
is from that expansion. The slow reduction exactly backwards. They raise prices when
of inflation coincides with a declining money prices in general are rising.
supply, which takes time to achieve.
17 AMCHAM SOUTH CHINA
Corporate Greed Is Not the Cause of
Inflation, Here’s Why
By U.S. Chamber of Commerce
“DWhat’s hesappipteening: The idea that corporate This is not to criticize the Fed’s COVID-era
monetary policy. It had to do what was
greed, orth“geremedafnlaytion,” is the cause of necessary to stop a financial crisis while the
perasristitcelnetsinflation is making the rounds again, world dealt with a pandemic. Unfortunately,
ssoucdiht’estchwrionyrginthagsre“gitreereadtifnlagtitohne.”obvious: there is no the timing for unwinding those actions got
away from the Fed for a variety of reasons,
corporate including how long the virus lingered and the
The“gfraecetds:flIantfliaotnio,”n is caused by clear and well- size and timing of the fiscal response to COVID.
undtheresrteooisd economic factors that stem from
tsouopnpmolytahnainynddgodmlelamorsarnechda. sPirnicgetsoroisfeewwhgeonodwseahnadve Business’ response: Businesses did not
sergvioceins.gTohenrethisannothing more complicated to cause the reduction in supply, the increase in
thethsteorsyimthpanlethat. demand, or the growth of the money supply.
They naturally reacted to the changes in
facts of the market prices that resulted from those things.
gDouoeridcnsogantnhodemspeyar.nvdiceems icco, uwpelehdadwiathlimanitiendcrseuapspelyinof
Businesses have no choice but to raise prices
demand. Prices rose as a result, but that effect when the costs of their inputs rise, which they
was short-lived. It faded once the economy have substantially, including their biggest
began reopening. expense – labor. If they don’t raise their prices
to accommodate these changes, they would
The Fed’s role: The more long-lasting effect see their margins shrink and could ultimately
of inflation is the Federal Reserve’s (the Fed) start losing money. They raise prices to offset
expansion of the money supply. This expansion these effects that would otherwise jeopardize
of the money supply was well above any increase their businesses.
in the size of the economy, hence too many
dollars facing too few goods and services. The Assuming that inflation exists because
persistent inflation we are experiencing now businesses raise prices gets the causality
is from that expansion. The slow reduction exactly backwards. They raise prices when
of inflation coincides with a declining money prices in general are rising.
supply, which takes time to achieve.
17 AMCHAM SOUTH CHINA
