I am always amazed how many people today confuse inflation with price fluctuations resulting from supply and demand. We heard this a lot at the Democrat’s convention. I don’t know if it is simple ignorance or an intentional diversion to pass off government-caused inflation as the nonsense they call corporate greed.

I took Economics 101 in college, and although I am a scientist, I thoroughly enjoyed it. I wasn’t smart enough to realize it then, but I was given a great gift I now appreciate daily. I took the course only by accident because I needed one social science class to complete a chemistry degree, and Econ 101 finished up the earliest in the afternoon, leaving plenty of time for research!

So, although I am only an amateur economist, I will give it a shot. And since I am not an academic economist, I will do it without charts, tables, or math.

Image by AI.

Inflation, as the name implies, is an increase in the money supply. That’s it, nothing more. There is only one entity that can increase the supply of money: the federal government. States can’t do it, cities can’t do it, Warren Buffett can’t do it, Kim Kardashian can’t do it.

Only the federal government can inject that money into the economy, either from taxation/fee receipts or from borrowing (that is, the issuance of government bonds). When the money injection results from borrowing, we call it printing money, and when done to pay off deficit or debt, it is called monetizing that debt. Adam Smith called this a “pretend payment” way back in 1776!

So, this additional money enters the economy, say on Monday, but the totality of goods and services comprising the economy is essentially the same on Sunday and Tuesday. This results in the phrase: more money chasing the same goods and services.

The inherent confusion between money and real wealth assumes that additional purchasing power has appeared by magic, courtesy of the government, and is an extension of confusing money with wealth. The glow of this sudden appearance of money is short-lived.

So, what must happen as a result? Prices of all those goods will rise to accommodate this additional money. Although economists can argue about the exact figure, a small level of inflation can be favorable as a leader or cause for growth, about 1.3 % (oh, wait, that’s what President Trump left office with). Much more than 1.3 % and inflation is unfavorable.

The reason is that this infusion of money is not backed up by anything more than that “full faith and credit” drivel. Time was, our currency was backed up by gold or silver, but even this was just a symbol. What currency really needs for support or backup is the productivity of people. That is, the work, creativity, inventiveness, effort, widgets, toil, etc., of all of us. Productivity of people is the driver of wealth.

When a large infusion of money enters the economy without being backed up (or resulting from) the productivity of people, what results is often called a “bubble.” It is essentially the gap between the money backed up by the productivity of people and the money created by government edict.

Bubbles are bad; they often burst, resulting in a rapid correction that hurts people. Never wanting to waste a crisis, politicians (especially of the leftist subspecies) will often use these occurrences to bash their favorite adversaries, usually industrial sectors. This is despite the cause being the politicians’ actions causing an increase in the money supply!

So, how does that differ from price fluctuations due to supply and demand? All we need to do is consider Mayberry.

That’s right. Sherriff Andy Taylor, Deputy Fife, Opie, and, of course, “Aint” Bea. There are two barbers in Mayberry, who cut the hair of all the men folk. Of course, there is Floyd, the barber, but Grandpappy Goober cuts hair out back of Wally’s fillin’ station. [I might be dating myself, but you can substitute any names and any little town you want; the discussion is the same.]

Well, one sad day, Grandpappy Goober dies, leaving only Floyd.

The very day that Grandpappy dies, Floyd has to raise his prices. Why? Because starting tomorrow, right after Grandpappy’s send-off, Floyd has to start cutting everybody’s hair. He will need more electricity, Vitalis or Brylcream, towels, shaving cream, and everything else a barber uses. He might even need to hire his nephew part-time to help out. He probably will have to open on Saturdays.

He might benefit a bit financially, but there will be no windfall because his expenses jumped. And he will have less time for chewing the fat. Prices will have increased because the demand was constant, but the supply decreased by 40 % or so (it could have been 50 %, but Grandpappy liked his afternoon naps).

Once Gomer gets home from the Marines, he might just pick up where grandpappy left off. He might decide to reopen the barber chair out back and slowly chip away at Floyd’s clientele. Guess what? With increased supply and the same demand, prices will stabilize at a lower level, absent external forces (yeah, that pesky government-caused inflation factor). Supply and demand work in unison to cause prices to fluctuate (and stabilize), but it has nothing to do with inflation.

With the vagaries of supply and demand, prices will change, up or down, depending on the externalities, but when they rise, it is simply not inflation. Calling it that is more than simply bad grammar; it is a falsehood.

So, as this presidential campaign unfolds and we hear phrases such as corporate greed, price gouging (or “gauging,” as our vice president thinks it is pronounced), etc., be mindful of language. Be quick to correct your leftist brethren, if not for fact, than at least for proper grammar.

Dr. Bruno, a scientist retired after more than 40 years in research, amuses himself writing books and editing scientific journals, along with wood and metal working.