Not sure what you are trying to say, but generally government finances itself exclusively from taxation and borrowing. At least traditionally. The problem in the last 2 decades is that it has used monetary policy to have its central bank bid up and buy up the debt the government issues which is a big no no for any fiscally responsible government. That was the big issue that put Germany and Greece at loggerheads during the Greek financial crisis. Greece attempted to have its own central bank buy the entire debt Greece issued. Strictly prohibited in Europe. And yet the US and Japan have done it for over 2 decades now. This is the problem that now hits home and is the main driver of the inflationary spiral.
I work in the manufacturing sector in China. What I see from here: -containers that used to cost 2000 USD now suddenly costs 14000 USD. Consider that then all the other costs (agent fees etc) are calculated as a % of the base container cost. -raw materials sourced locally did not increase much in price. Imported raw materials skyrocketed also here and/or became impossible to find. For sure there is a big component of fiscal/monetary policy, but I would say that a good chunk of the inflation we are seeing globally is due to the insane transport costs.
Definitely a notable component which I forgot to mention, thank you for the reminder. On which the major driving factor is we probably need to disagree.
See my response below. Tried to edit out the italics. I can, but then when I "Save Changes" these just reappear. Have no idea what the problem is. Also I can edit typos and spacing but they too reappear. I give up. So there are a few sentences that my be unreadable, and I few others that don't say exactly what I intended. Sorry. Can't fix it. I pasted the post below from my word processor. looks fine until I save it.
[M.W. – this is long response. We are all busy. I will not be insulted if you haven't the time to read it in its entirety.] I asked for a definition of "sourcing prices", because I did not understand your reasoning in your statement quoted in the blank response above. Tariffs are import duties paid by the importer. A portion, at least, of a tariff will be passed to the importer's customers. Tariffs reduce competition from imports, but higher prices for both imported and competing, domestically-produced products result. There may be good tariffs, which are bilaterally negotiated to equalize competition. There certainly are bad ones, politically motivated and ostensibly used to protect special interests. Our experience with the Smoot-Hartley laws of the1930's taught us to be wary of tariffs. In general they are counter productive, as they lead to trade wars. I also wasn't sure what you were refering to in "long term effects" -- a qualifier used in your post #4. Sticky prices perhaps? I have to disagree that "monetary policy... is where should be looking". In that regard you might find the J.C. Williams paper I recommended to SoyUnPerador interesting. Finally, I can not agree that "generally government finances itself exclusively from taxation and borrowing" -- your post #11. Most governments finance their operations with a combination of taxation, borrowing, and money printing, but there are exceptions such as the United States! The U.S., and some other countries too, has no outstanding debt denominated in another countries currency. The U.S. government finances its operations through taxation, and printing. It does not borrow! The United States Government does not borrow and there is no National Debt. Debts are liabilities, and so is the money the U.S. "prints" and spends into the private sector. It could be argued --- it's a strained argument --- that the liability created by printing money is actually "debt". However this liability is set-off against the assets obtained by the government in exchange for the newly created money. One could also argue that these assets are wasting assets set off against a permanent liability. This too is wrong, because money liability can be removed by taxing. In reality, the U.S. government has no debt. The Treasury securities it auctions appear to be debt instruments but actually serve entirely different purposes than the raising of money to spend. Every Treasury Security sold will have been covered by new money by the time it is auctioned. When the Treasury does not have enough in its accounts to cover its checks, the Central bank covers them by crediting the Treasury's reserve account. This is the "printing step", and it is the only printing step. The Treasury can only spend in, and the Central bank can only print in, the amount of deficits authorized by Congress. Therefore the Central Bank Does Not Determine How Much New Money Gets Printed! (vide infra) This amount gets determined indirectly by Congress when it decides how much to tax and how much to spend. Only Congress can do this. When the Central Bank (C.B.) goes into the Secondary market to buy Treasuries most people assume they are printing the money they use to buy Treasury Securities. They are not net printing. What they are doing, in net, is exchanging money already printed for a Treasury Security. When the Treasury auctions a security, the money paid for the security flows back to the government's side of the ledger. When the C.B. later buys a security back from the private sector it is, in effect, using the money that flowed back to the government's side of the ledger when the Treasury was auctioned. This looks like slight of hand to some who say, “But wait a minute, Treasury got the proceeds from the security auction, but the Central Bank needs the proceeds to buy the Security back.” This is no problem other than for those who still believe today's Central Bank is a privately owned for profit bank! (A simplified model can generally be used that has only a government side and a private sector side . In this Model all people, even government employees, are in the private sector. The Treasury and the Central bank, without any people!, are on the Government side of the ledger and it is not necessary for a correct understanding of the overall or net money operation to separate the Treasury operation from the Central Bank operation. A person who wants to understand these operations in detail, however, will need a more complex model that separates Treasury and Central Bank operations. See for example: https://nathantankus.substack.com/p/the-federal-government-always-money?s=r ) The important point is that, regardless of the model used, there is only one net money creation step, not two. It will help to realize that once a Treasury Security held on the Central Bank's Balance sheet matures, the principle paid by the Treasury to the Central Bank flows automatically back to the Treasury! In trying to understand these operations, and consequently how it is that the U.S. does not engage in real borrowing to pay for its deficit expenditures, it is also helpful to recall that the Central Bank buys its Treasury Securities on the secondary market, i.e., from the private sector, and not directly from the Treasury. This is an important because the Central Bank's purchases must be credited to private sector reserve accounts rather than the Government's reserve accounts. People sometimes wonder why the C.B. doesn't just buy Treasuries directly from the Treasury. If it did that the transaction would register in the Treasury's reserve account, creating a null transaction with no government private sector transfer. People are aware of the C.B. printing and distributing federal reserve notes. Isn't this another money creation? It's not, because reserve notes are printed in exchange for debited bank reserves according to demand. They are removed with similar alacrity by crediting reserve accounts. If a person is interested in following up on what I have posted here, there are now literally hundreds of papers and fora on the net, many You Tube videos , many books and monographs and even one undergraduate economics text that (finally!) covers this material correctly. Any economist trained in the last ~30 years will likely be up to speed on this stuff, but anyone older is likely to have it all wrong! If we look for it, we'll probably have little trouble finding "economists" who insist QE will lead to hyperinflation. Were you were hanging out at ET during 2008-9 ? If you were, you read countless posts decrying the coming hyperinflation! This didn't happen (see J.C. Williams paper). Nor is it a too loose monetary policy for too long that's a significant genesis of our present too high inflation. It may have contributed, but if it did, it's a minor contributor. The loose monetary policy held through the pandemic facilitated a "pandemic bump" in M2 (see iPatent's chart of M2, this thread). M2 is a measure of the "money stock" which is driven largely by credit. M2 is, at most, a minor factor in driving the present inflation. Falling incomes resulted in growth in M2 during the Pandemic. That is to say, as incomes fell, credit was called upon to keep the wolf away from households and businesses. Credit expansion kept demand for goods and services from falling as much as it otherwise would have. Demand in some sectors increased but in others it fell. Overall there was no increase in demand due to M2 rising steeply.** The real contributors to outsize inflation in the face of fairly robust demand seems to be virtually all on the supply side. (See for example Baozi's post #12, in this thread.) Along with the decision to abandon the TPP and putting on ill-thought-through tariffs that were not timely removed by the Biden Administration, a steep increase in shipping costs occurred in our shipping-dependent global economy. This factor must be considered among other factors in the Genesis of our present inflation. There is no way to quickly put the TPP back together, but other supply-side impediments to bringing prices down can be removed or at least ameliorated. Repeating what I posted earlier, the C.B. is trying to reduce demand by raising rates, this is the classic approach to combating inflation, and it may be the only one available if supply shortages are being driven by externalities that the U.S. can't do much about. Bumping up the Fed funds rate is an inherently weak tool, however, as demand decreases with interest rates non-linearly. A large increase in rates is needed to see much of an effect. Rate increases will have minimal effect until very high rates push the economy into recession. What is needed now, along with a reasonable funds rate*, is an all hands on deck approach to boosting supply. This should be the first order of business for the Biden Administration. There is quite a lot that could be done. The first step must be to get rid entirely of the crazy Trump era tariffs. At the same time, a carrot and stick approach to a new Iran Nuclear Deal --yet another thing wrecked by a numbskull-- can succeed if it includes lucrative new markets for Iran's oil. And what good can come from bad mouthing China? -- Something the previous Administration incessantly did! We need China on our side, not on Russia's. Lets get China to accept our m-RNA vaccines. That would be a huge win for goodwill and for the World! World food shortage looms and will cause still more upward pressure on food prices if we don't start now to do something about it. There is grain in Ukraine that can't be shipped by the usual routes. The U.S. should be assisting to find alternative shipping routes. This grain must reach its normal destinations. (A swift end to the war in Ukraine would be most helpful. But NATO is holding back on the type of weapons that could bring that about. Why?) Finally President Biden needs an ad hoc shipping advisory panel under the Dept. of Transportation to make recommendations on ways to bring more competition and capacity to shipping. Hopefully this is underway. We can conquer inflation, but we shouldn't rely on the Fed to do it with monetary policy alone! Their approach, while ultimately effective, would be be both painful and damaging. _______________ *It was held too low for too long. This is not hindsight. ** It's essential to distinguish between “outside” and “inside” money. Money the C.B. creates when it credits the Treasury's reserve account to cover overdrafts is “outside money”. Money that flows from the government sector to the private sector, or vice versa, is outside money. Temporary money created within the private sector is “inside” or “credit money”, or simply “credit”. Inside money is created when a loan is made and disappears when a loan is paid off. M2, which includes money in bank accounts, is responsive to inside money. Inside money stays within the private sector. Most of the money in the economy is inside money. When economists talk about the “money supply” they are talking about credit unless it is clear from the context they are referring to outside money.
Please outline the laws or bills or any official guidelines that allow the US government to print money. This is the exclusive privilege of the federal reserve bank and not of the government. Not sure where you learned your basic economics but everywhere else reality is taught.
With regard to your request for me to , "Please outline the laws or bills or any official guidelines that allow the US government to print money", see Article I, section 8,of the U.S. Constitution which underlies and permits the present day Congresses to cause money to be created." Many subsequent laws passed also bare on this. Only Congress can decide how much money to create, but they have delegated the actual creation to other government bodies. It may come as a shock to know that Nancy Pelosi is not stamping out nickels in her office. No, I'm sorry but the Constitution gives only Congress the power of the purse. And all newly created money enters the economy by being spent in. A deficit is required to create new money. That's its only route into the economy. The Central bank can only create as much new money as deficits approved by Congress will allow. Sorry but on this point you are quite incorrect. You have millions of others as company, if that makes you feel better. I can't recommend John C. Williams 2012 paper too highly to you. Williams was CEO of the San Francisco Branch bank at the time. Of course I am not surp[rised that you believe as you do. Most people if they no any thing at all about where U.S. money originates from believe exactly as you. Unfortunately it's wrong. Maybe if you read the younger economists you will change your mind. One thing that might help bring your thinking aoround is to recognize that the U.S., in an emergency can, in a few days with Congresses approval, write checks for a trillion dollars, previously unbudgeted if necessary. Everyone knows that's the case, they've seen it happen. But they never stop to think how impossible that would be if the government first had to borrow a trillion dollars by auctioning securities. The U.S. always money finances its spending. It does not borrow to spend. The Nathan Tankus paper I gave you a link to would also be enlightening reading for you. When we have been told something that is untrue for virtually all our lives, naturally we resist information that proves that what we've been told is false. Incidentally, I am old enough to remember first hand what happened the last time an externality caused double high inflation, and how the central bank resoonded and what the result was.
So you are wrong by your own admission. Government, and everyone knows this refers to the current administration DOES NOT create nor print money. The federal reserve bank is tasked with either expanding or shrinking the current balance. Case closed.
%% THATS part of it\ tariffs[tax] matter a lot, on lumber + anything ,SoyUn. Wages, energy ..... matter also. One of my favorite quotes= ''one monkey don't stop no show'' NOR does a bunch of monkeys throwing darts @ WSJ or IBD.LOL