As someone with a degree in Misesian (Austrian) economics, I find that Kamala Harris has given me an unlimited supply of ill-informed economic policies to tear apart. Take, for instance, her proposed ban on grocery price gouging. Such a policy is almost certain to lead to shortages, as it disrupts the natural market mechanisms that balance supply and demand. Moreover, the concept of “profit-driven inflation” is fundamentally flawed. Inflation is not caused by corporate greed but is, in fact, a monetary phenomenon. The real culprit behind inflation is the Biden administration’s reckless expansion of the money supply, soaring debt, and excessive government spending.
Under Biden, the M2 money supply—which includes cash, checking deposits, and easily convertible near money—has ballooned. In 2019, the M2 money supply was approximately $15.4 trillion. By 2024, it had surged to around $21.02 trillion, representing an increase of nearly 36%. This unprecedented growth in the money supply is the primary driver of the inflation we’re experiencing today, not the actions of individual companies.
The basic law of supply and demand tells us that when supply increases while demand remains the same, prices go down. The same principle applies to money. When the government prints more money, the value of each dollar—its buying power—decreases. This is why your grocery bills are much higher now than they were under Trump.
Kamala’s proof of price gouging relies on a questionable calculation that she believes shows milk producers increased prices beyond the decades-high inflation created by the Biden administration. First off, production quantities are set months in advance of when products will be sold. As a result, prices are set based on expectations about future inflation. So, while inflation may have been 5% when production was underway, analysts rightly anticipated that inflation would be higher by the time the products reached the market, and therefore, they set the prices accordingly.
The reason socialism fails is because governments are backward-looking, while companies have to be forward-looking. The government, after the fact, has the benefit of perfect data and no skin in the game. They then analyze retrospectively the actions of corporations and decide what the companies did wrong. Another issue with the government is that they intentionally use limited information to arrive at a desired narrative. For example, when they claimed gasoline companies made record profits in the second year of the pandemic, they ignored the fact that these same companies suffered incredible losses in the first year of the pandemic because no one was driving. The companies average those gains and losses and arrive at a normal average profit. The Kamalites, however, just look at the gains, ignore the losses, and claim higher-than-usual profits.
Capping prices and forcing companies to sell at a price lower than what they believe the market price should be will inevitably result in shortages. Companies will simply stop producing a product if the government forces them to sell it at a price lower than the cost plus a normal profit. Moreover, the government should not have the authority to determine what constitutes a “normal” profit because it lacks the detailed information that corporations gain through countless interactions between buyers and sellers, happening millions of times every day.
Another point the Biden White House misses is that profits were higher in nominal terms because of inflation. The number of dollars was higher than the previous year, but those dollars were worth less than before. So, when you take a normal 3-8% profit margin and multiply it by the 13% inflated dollars, you end up with a staggering number, which Kamala and Joe claim was price gouging. In reality, it wasn’t price gouging—it was just the normal effects of inflation.
When oil prices go up, the price of everything else follows. Joe Biden’s approach of insulting Saudi Arabia and refusing to engage with them as Trump did caused oil prices to rise. Add to this the Bidenflation factor, and costs skyrocketed. To stay in business, companies had to charge prices that covered the added costs from Biden’s policies plus a normal profit margin, which, once again, resulted in big, scary numbers. Kamala’s response was to raise the minimum wage, which accounts for 20%-40% of prices. So, raising the minimum wage further increased prices…
Getting back to the milk example Kamala is harping on: Her portrayal is that big, greedy, Republican-voting milk companies gouged the price of milk because they supposedly hate children and families and want kids to underperform in school for some reason. According to this narrative, the milk companies all spontaneously decided to call each other and say, “Let’s raise the price of milk really high.” And apparently, they chose this exact moment in history to do it because, for some reason, they had never thought of it before.
If the narrative that big, evil corporations raised prices out of greed were true, then it should also be true that nice, kind, children-loving, Democrat-voting farmers and small milk producers would be selling milk at a lower price. However, if you look at prices at big-box stores like Target and Walmart, everything, including milk, is actually cheaper than at mom-and-pop stores. This shows that the antitrust narrative falls apart. Big-box stores, large producers, and commercial farms end up dominating the sector because they are more efficient and can sell goods cheaper than small producers. If this weren’t the case, small producers would enter the market, sell at lower prices, and make more money—but they can’t.
Kamala’s economic policies are the exact answers you’d get from a five-year-old. If you ask a child, “Milk is really expensive, what should the government do?” your kid might say, “The government should make them sell it cheaper.” As much as you love your children, you probably don’t let them make major decisions for your family. It would be just as misguided to have them write national economic policies.
The post No, Kamala, There is no Profit-Driven Inflation appeared first on The Gateway Pundit.
