Like an oil slick on the sea | Inflation

Financial analysts, regulators and the press have, in my opinion, given little importance to the issue of inertial inflation. That is, inflation that is generated and multiplied as a consequence of monetary expansion or money supply. 

Rather, it seems that the inflationary outbreak that has authorities and financiers worried is the one that has produced a rise in costs. This inflation stems from the restrictions on the supply of goods due to port congestion and the global collapse of supply chains. In the last month, the effects of the war, the blockade and the economic sanctions against Russia have added to the shortages and thus put more pressure on world prices.

Mass dollar production

In the face of this short-term scenario, the enormous issuance of dollars that the United States has created out of thin air to finance a gigantic infrastructure renovation and to finance massive aid and subsidies has gone unnoticed. It is known that, since the beginning of the Democratic administration, dollars equivalent to 32% of all the dollars issued before have been issued!

Since it is almost impossible for those dollars to immediately generate production that consumes them, the immediate effect is the loss of value of that currency due to excess supply. Too many dollars chasing too few goods, and the loss of value is automatically reflected in higher prices. These are adjusted to retain purchasing power, which often ends in a spiral of upward adjustments.

Inflationary Effect

The inflationary effect of monetary expansion corrodes all aspects of the economy, and like an oil slick in the sea, it expands silently, at the speed of the economy and accelerates as consumers' inflationary expectations become more pessimistic.