Inflation versus Rising Prices
President Biden declared in 2020, as he campaigned for the U.S. presidency, that “Milton Friedman is no longer in charge.” This is ironic given that more than 10 months into Mr. Biden’s presidency (and driven by massive increases in fiscal and monetary policy from his and the previous administration) he is presiding over the highest rate of U.S. inflation in more than thirty years. It seems Mr. Biden could use an economics lesson or two from the University of Chicago icon, as Dr. Friedman seems more relevant than ever in fighting inflation. Especially when one considers Friedman’s secondary definition of inflation as a “cruel tax”. Friedman often noted that inflation reduces personal purchasing power as more dollars are injected into the economy relative to output making each dollar less valuable and harming the poor disproportionately!
Inflation and How We Celebrated Thanksgiving
Current year over year inflation in the United States is running at 6.2 percent, with states like Ohio running at roughly 6.5 percent, slightly higher than the national average.
There is much debate as to whether this inflationary spike is transitory or permanent and how much of our current rising prices are caused by supply chain malfunctions and/or increases in demand for a popular product or service. Or, whether it is as scholars like Milton Friedman would argue largely due to excessive government spending and monetary policy used to fight the pandemic. One can certainly look at the more than two trillion dollars the Federal Reserve has injected into the economy in the last 2 years and upwards of 8.6 trillion dollars designated or under debate to be spent as the root cause of today’s inflation surge. This excessive liquidity in the capital markets certainly validates Friedman’s explanation of why prices across the economy are increasing with no general explanation other than there is more money in the economy chasing the same or slightly more goods and services.
As Thanksgiving is now behind us, our research concluded Americans paid more this year ($53.94) for a traditional dinner for 10, including turkey, bread stuffing, sweet potatoes, rolls with butter, peas, cranberries, a relish tray of carrots and celery, pumpkin pie with whipped cream, coffee, milk and/or water to drink. This cost was 15 percent higher than last year’s 10 year low of $46.90 and 9.87 percent higher than the previous 10-year average of $49.10 according to Statista. Many Americans chose to substitute the traditional turkey (turkey prices were up between 20 and 24 percent) with chicken to make the meal more affordable.
It is clear to us that the higher price of Thanksgiving dinner is the validation of Friedman’s premise that inflation is a monetary phenomenon caused by excessive government monetary and fiscal policy with only a minor level of higher prices at Thanksgiving due to supply chain problems. Additionally, the cost to travel and spend Thanksgiving with family or friends was also considerably higher in 2021.
Based on current national averages: gasoline is up 61 percent; hotels are up over 25 percent; airline tickets are up over 24 percent; rental cars are up roughly 86 percent; new cars are up 9.8 percent; and the cost of used cars, SUVs and trucks are up almost 26 percent year over year. So, chances are your overall costs of Thanksgiving travel were considerably higher this year
Let’s Not Forget Why We Celebrate Thanksgiving
We hope at this time of year Americans reflect on the very meaning of Thanksgiving. From the first Thanksgiving in the 1600s in Massachusetts to modern times, Thanksgiving has been a time to reflect on the many blessings, good times, and people in our lives who have made a difference, and to give thanks that we are very fortunate to be citizens of the greatest country in the history of the world.
Even with inflation at a 31-year high, it is our hope that every American still had a joyous Thanksgiving and maintains the prospect of a better future. It is more important than ever to show generosity this holiday season, and we must all do our best to reach out with treasure and time to enhance the holidays for others while enhancing our own by the process!
Finally, for the sake of a bright future here in Ohio and across the country, it would be wise if Milton Friedman once again became relevant in the White House, the halls of the U.S. Congress and here in Columbus and state capitals throughout the land moving forward!