Domitrovic then goes on to explain what verbal subterfuge it all is. He writes:
He is especially to be commended for identifying the cause of higher overall prices: increases in the stock of money.[T]he consumer price index for the first quarter of 2011 came in at an annual rate of 6%. This is a level last hit for the year in 1982 and was the very rate in 1976 and 1977: the bad old days of stagflation. And wouldn’t you know it, our GDP and employment growth stinks right now too. If they make a TV program about our day and age, they should call it “That ’70s Show.”
Central bankers’ prodigality has caused this situation. Quantitative easing and such leads people to doubt the value of the dollar and makes producers mark prices up. Yet the Fed’s tactic in the face of this reality is to play word-games. Inflation is not beginning to ravage the land, the argument runs, in that “core” – ok, “underlying” – inflation isn’t so bad. If you take out food and energy, “headline” stuff, everything’s normal.Well I guess so then. But nourishment and movement are precisely the two things that Aristotle said distinguish animals first from rocks and then plants. These are not trivial categories of goods, as nobody needs to be told. And it’s not just food and energy. Look at raw materials beyond those used for energy: all up in price. Gold leads the way at $1500 an ounce.
My only quibble would be to note that it is not only doubts about the future value of the dollar that causes producers to increase their minimum selling prices. It is also, primarily, actual increases in the demand for goods as people spend the new money that has been created.