What exactly do Conservatives think inflation is?

Just as the left seized upon the former laudatory designation of “liberal,” economists stole “inflation.” Once evidence of currency contraction, inflation has now become excessive economic growth. Worse, implicit in the impossibility of “excessive economic growth” is the utterly bankrupt Keynesian notion that government spending is the primary accelerator of economic growth.

The latter is exactly what Larry Summers meant in 2021, when a President-elect Biden did as a re-elected President Trump would do and dumped nearly $2 trillion more in “stimulus” spending on the American people. This was the theoretical compensation for the tragic lockdowns imposed on Americans in 2020 by President Trump, and then nationally, as then-President Trump signed a $3 trillion coronavirus bill that, among other things, subsidized lockdowns in nearly every US state.

What emphasizes Summers’ analysis is that he is a thoroughgoing Keynesian. In his vision of the world, government consumption is of some kind otherseemingly exported from Pluto, only for consumption by the state to expand the economy.

Conservatives have long seen the world differently, especially conservatives in the Wall Street Journal’s editorial page. Such was the influence of Robert Bartley, longtime editor of the Wall Street Journal editorial page, along with his deputy, George Meloan. They embraced the crucial truth in Say’s Law that all consumption precedes production. And since governments produce nothing, they can hardly increase demand.

Summers, Paul Krugman and other Keynesians have long believed otherwise. They imagine an economic “multiplier” born of government consumption as a dollar consumed by government would permeate the economy, thus expanding beyond $1. No, there is production and nothing else.

However, Summers once again saw inflation in the spending that Biden foolishly agreed to. The only difference in 2021-2022 was that the wealth extracted from the private sector was suddenly inflation for conservatives. The most surprising thing was that the Wall Street Journal’s The editorial page joined the inflation chorus with talk of “excess demand” generated by government spending. Yes, the Keynesian multiplier. THE of the magazine the editorial page continues to sing to this refrain.

Last week, an article argued that the Fed’s policy choices under Powell’s leadership caused “inflation to soar.” Somehow, the Fed adjusted “surge in federal spending” as if the central bank can conjure up demand, plus it kept interest rates “low for too long”. The analysis combined Keynesian multiplier theory with the discredited Phillips curve thought, which says that a central bank that produces nothing can somehow expand credit en route to a growth-induced inflationary burst.

None of this made sense, but it made sense that prices would rise after the lockdowns from 2020. Anything that breaks globalized production naturally leads to higher prices, just as anything that integrates global production naturally leads to lower prices. The earlier truths, long alive from history, have been haughtily rejected by them of the magazine editorial page. Really, what did Adam Smith know!?

Which brings us to one last thing: where has the dollar fallen, either against foreign currencies (see the WSJ Dollar Index from 2020 to 2022) or against gold over the period Newspaper claimed and still claims that the policies of Joe Biden and Jerome Powell caused inflation? That there was no notable decline is the real truth, though not discussed by them Wall Street Journal editorial page and conservatives more broadly. Which begs the question once again in the title of this article: what exactly do conservatives think inflation is?