If you want to know what it means to add insult to injury, look no further than Treasury Secretary Janet Yellen. In a recent late-night interview, she blamed inflation on consumers spending too much. Not only was Yellen complicit in creating inflation, but now she has the impudence to blame the American people who are suffering from her disastrous decisions.
Yellen asserted that everyone wanted to buy “grills and office furniture” and computers for working at home during the pandemic. There is certainly some truth to that part of her narrative, but citing this as the root cause of inflation is simply a bridge too far. Higher demand for certain items only explains why prices for those particular products increased. It does not explain why prices everywhere rose.
Furthermore, the change in consumer preferences should have caused other prices to fall. As people start purchasing more of one thing, they purchase less of something else, and the price of the latter will decline as demand decreases. If consumers suddenly shift from purchasing chicken to purchasing beef, then the price of chicken will fall while the price of beef rises; the laws of supply and demand are always at work in the economy.
Yet this tradeoff of consumer preferences is not what the data show during President Joe Biden’s tenure in office. Specific price increases have not been offset by decreases elsewhere. Instead, price increases have been widespread, with the overall price level skyrocketing.
When Biden was inaugurated, the consumer price index (CPI)—a broad gauge of prices used to measure inflation—was growing at a 1.4 percent annual rate. Within a year and a half, however, the CPI was growing at a 1.3 percent monthly rate. In other words, prices were rising in a single month about as fast as they rose in the entire year before Biden took office.
And those increases have been widespread, not limited to just grills and office furniture. Food prices have risen 16 percent under Biden. Energy prices have shot up 43 percent. And the dramatic rise in prices has also not been limited to consumer prices. Wholesale inflation, which measures the increase in prices paid by businesses, set 13 new record highs in a row on Biden’s watch.
The idea that consumers cause inflation does not even pass the smell test. Consumer preferences are constantly changing as the marketplace changes, with new innovations and a dynamic selection of products and services. This did not magically start when Biden was elected.
If not consumers, then what causes inflation? In a word, government. The Treasury spends much more than it collects in taxes, and the Federal Reserve creates the money needed to cover the shortfall. That devalues the dollar, which in turn increases the number of dollars consumers and businesses alike need to purchase anything and everything.
This is why prices everywhere rise from inflation. It’s not that things are more expensive—it’s that the dollar is worth less than before.
The obscene deficit spending under Biden, on top of the unnecessary deficits from the previous administration, helped create this inflationary disaster that is impoverishing the American people. As the Fed continued creating cash to finance the spending spree at Yellen’s Treasury Department, the government sowed the wind of profligacy, and now the American people are reaping the whirlwind of inflation.
Consumers do not have the ability to print money—only the federal government can do that. This is why only the government can create inflation. Yellen’s assertion that consumers are to blame could not be further from the truth nor more insulting. As an accomplice in the scheme of inflation, she rubs salt in the wound by casting blame instead of looking in a mirror and giving a mea culpa.
In the same late-night interview, Yellen said that she repeatedly practiced her signature so that it would be legible on Federal Reserve Bank Notes (dollar bills), unlike the illegible signatures of some previous Treasury secretaries. But an elegant signature on money is of no importance compared to the issue of that same money’s stability.
The American people would have been much better served if Yellen had practiced sound finance instead of good penmanship.
This piece originally appeared in MSN