Despite once touting itself as “The Most Trusted Name in News,” CNN’s economic knowledge and reporting seem to be lacking. Last week, they published a thought-provoking article titled Why do businesses keep raising their prices, which began with the claim:
After two years of surging prices, economists still can’t agree on what has caused the world’s worst inflation crisis in decades.
It remains unclear which economists CNN is specifically referring to, but it is evident they are not considering the views of Austrian economists. For over a century, Austrian economists have extensively studied and documented the relationship between increasing the money supply (inflation) and its various consequences, including the rise in prices (commonly referred to as inflation).
In his 1912 book, The Theory of Money and Credit, Ludwig von Mises devotes a whole chapter to the subject of Inflationism. Within this chapter lies one of the cheekiest quotes from von Mises:
Fiat – money! Let the State ‘create’ money, and make the poor rich, and free them from the bonds of the capitalists!
Instead of recognizing the economic history of the past century or acknowledging the Fed’s $5 trillion balance sheet expansion beginning in 2020, CNN doubles down on its (presumably) intentional ignorance by stating:
While the usual culprits cited by economists include pandemic-era supply chain bottlenecks, the war in Ukraine and various US economic policies, others say it’s due to “greedflation,” the idea that companies use higher inflation rates as an excuse to jack up prices and grow their margins.
It’s difficult to determine which red herring is more misleading, but all of them are disheartening to hear. However, the situation becomes even worse when a proposed solution is eventually offered. Citing a New York Federal Reserve survey of over 700 business owners, it was found that:
... strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation.
That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. In other words, it’s Econ 101: Good, old-fashioned supply and demand.
The above quote becomes even more ironic when they cite supply and demand, yet conveniently ignore the supply and demand for money in their analysis. In their world, seemingly based on propaganda and subterfuge, it’s as if people inexplicably develop a sudden desire to buy more things without considering the underlying dynamics of monetary supply.
CNN can be held responsible here, but to maintain a compliant population, the endorsement of mainstream economists becomes crucial. A recent example of this influence can be seen in the publication by former Fed Chair Ben Bernanke and economist Olivier Blanchard on May 23 titled What Caused the U.S. Pandemic-Era Inflation?. The opening of the paper similarly shows that the real-world economy is the least of their concerns:
Central bankers and most outside economists failed to predict the sharp rise in inflation that began in 2021 … Action was further delayed by the view that the inflation burst would be temporary.
It reminds me of the article I wrote in 2021, “Transitory Inflation” Is the New Buzz Phrase at the Fed, which delves into the issue with the concept of “temporary” inflation. Unfortunately, we live in a world where the statements made by “them” are almost entirely contradictory to the reality of the situation.
When they claimed that (price) inflation was temporary, it must have meant permanent. When they declared their intention to combat inflation, it seems they were only exacerbating it. And when they appear confused about the root cause of the price increases, they’re not speaking for all economists, but only the most highly decorated and handsomely paid ones.
