SEOUL, REPUBLIC OF KOREA: Gold bars are displayed at Shinhan Bank in Seoul on 09 January 2004. Gold … [+]
Without defending Joe Biden’s unfortunate presidency, future economics books will correct the “Bidenflation” narrative that Republicans and Democrats continue to embrace. Inflation is a decline in the value of the dollar, and the dollar didn’t decline in any notable way at the time (2021-22) when inflation allegedly reared its ugly head.
We know this because the price of gold doesn’t move. When the metal rises that’s indicative of a decline in the value of the dollar, and vice versa.
Looking back to when Biden entered office in late January of 2021, the price of gold was roughly $1,859. It had been $1,560 a year before.
Considering the price of gold throughout 2021, it averaged out to roughly $1,798/ounce, meaning the value of the dollar actually rose around 3 percent right at the time that the economy-sapping tax that is government spending continued under Biden, and allegedly caused “inflation.” To be clear, government spending is the worst tax of all exactly because it substitutes central planning of resources by the government for that of the private sector. Still, it logically doesn’t cause higher prices, or “inflation,” and it didn’t if gold is to be believed.
By February of 2022, it’s notable that the price of gold had increased to $1,935/ounce, and while the latter signals a 4 percent decline in the dollar relative to 2021, the decline wouldn’t be indicative of any kind of inflationary breakout. Again, the price of gold rejects the Bidenflation narrative.
What’s disturbing about all this is that Republicans who’ve long leaned toward gold as an objective way of defining currency weakness (inflation), strength, or lack thereof, decided to ignore the gold signal in 2021-22. It’s perhaps easy to see why. Higher prices had most certainly revealed themselves from 2021-22, but rather than point out the obvious (there’s an ocean of difference between rising prices and inflation), Republicans decided the politics of “Bidenflation” were just too good. Gold be damned! Only for them to double down.
If there’s one thing Republicans especially believe (with good reason, because it’s true), it’s that governments produce nothing, hence their spending introduces no new “demand” into the economy. Behind all demand is production, always and everywhere. Which means governments can only spend insofar as taxpayers and savers have less to spend.
Except that the politics of pinning inflation on Biden were once again too good, at which point Republicans ignored gold while embracing the Keynesian “multiplier” to support their Bidenflation case. They quite literally claimed against logic and Say’s Law that government spending under Biden powered “excess demand” that drove up prices. They still claim this.
As for Democrats, they were already incorrect about the causes of inflation given their longstanding belief in impossibilities like the Keynesian “multiplier.” Which means the inflation that wasn’t, and that was said to be caused by government spending, was easy for the Dems to latch onto.
Back to reality, the greatest driver of falling prices (and nothing else comes close) is the number of hands and machines at work in the creation of market goods. Just the same, the greatest driver of rising prices is a lack of hands and machines working together. The lockdowns that were a consequence of political panic about the coronavirus (Donald Trump was in office at the time) to varying degrees eviscerated the aforementioned global cooperation. Higher prices that had nothing to do with inflation were the logical result, but lockdowns aren’t the same as inflation.
As mentioned up front, in the future the Bidenflation narrative will be discredited as political types move on from Biden’s failed presidency, and look at the 2021-22 “inflation” more objectively. It wasn’t. The value of the dollar is clear on the matter.
