The cause and cure for inflation. A discussion with the AI, Copilot.

Copilot seems to be a fairly good Artificial Intelligence system. However, it suffers from the same problems all AIs do: They gather and spit out information and often don’t comprehend logic.

While discussions with Copilot can be frustrating — it hardheadedly repeats what it already has said and often doesn’t respond to your argument — it does help reveal counter-arguments you may not have considered.

That said, I enjoy seeing what the world (i.e. the world that AI samples) says about various ideas. After all, Copilot reads far more than I can, so it usually represents most common beliefs.

Here is an example of my discussion with Copilot regarding the cause and cure for inflation. If you never have had a discussion with AI, you especially will find this enlightening:

You
Virtually all businesses borrow and/or use materials made by companies that borrow. Interest is a cost. Businesses price their products to make a profit over costs.

Therefore, increasing interest rates increases business costs, which in turn increases the prices of nearly all goods and services. Is this correct? If not, why? The 15 Biggest Risks Of Artificial Intelligence

Copilot
You’re on the right track! When interest rates rise, businesses can face several challenges that impact their costs and pricing.

Here’s how it works:

Reduced Ability To Service Debt: Rising interest rates increase the cost of borrowing.

If a business has existing debt with variable interest rates, servicing that debt becomes more expensive.

This can strain cash flow, leaving less capital available for other investments or operational expenses. As a result, businesses might prioritize debt payments over growth initiatives, potentially limiting their overall potential.

Slower Growth: Access to capital is crucial for business expansion. When interest rates go up, borrowing becomes costlier.

Businesses may scale back growth plans to avoid excessive liabilities relative to their income. This slower growth can impact their ability to introduce new products, expand operations, or invest in marketing.

Consumer Purchasing Power: Higher interest rates affect consumers too. Borrowing costs for personal expenses (like mortgages and car loans) increase, reducing consumers’ purchasing power.

When consumers spend less, businesses may face decreased demand for their goods and services, impacting revenue and profitability.

In summary, rising interest rates can indeed lead to increased business costs, affecting pricing and growth.

Business owners must carefully manage their capital structure and adapt to changing economic conditions to maintain competitiveness and profitability.

You
If, as you say, “rising interest rates can indeed lead to increased business costs, affecting pricing and growth,” raising interest rates to combat inflation is counterproductive.

Those higher interest rates cause higher prices. True?

Copilot
You’ve raised an interesting point! Let’s delve into this further.

When central banks raise interest rates to combat inflation, their primary goal is to manage the overall economy. Here’s how it works:

Controlling Inflation: Inflation occurs when the general price level of goods and services rises over time. Central banks aim for moderate inflation (usually around 2%) to promote economic stability. If inflation exceeds this target, it can erode purchasing power and disrupt economic equilibrium.

Interest Rate Impact: Central banks adjust interest rates (usually the policy rate) to influence borrowing costs. When rates rise:

Borrowing Costs Increase: As you rightly pointed out, businesses face higher borrowing costs. This affects their investment decisions and can slow down economic activity.

Consumer Spending: Higher interest rates also impact consumers. Mortgages, car loans, and credit card rates increase, reducing disposable income. Consumers may cut back on spending, affecting demand for goods and services.

Trade-Off: Central banks face a trade-off. If they keep interest rates too low for too long, inflation can spiral out of control. Conversely, if rates are too high, economic growth may suffer. Striking the right balance is crucial.

Expectations Matter: The impact of interest rate changes depends on expectations. If businesses and consumers believe that higher rates will curb inflation, they may adjust their behavior accordingly. This can mitigate the impact on prices.

In summary, while raising interest rates can lead to higher business costs and potentially impact prices, central banks use this tool strategically to manage inflation and overall economic health.

It’s a delicate balancing act, and the effectiveness varies based on the specific context and expectations within the economy.

You
You said, “while raising interest rates can lead to HIGHER BUSINESS COSTS and potentially impact prices, central banks use this tool strategically to manage inflation.”

In short, the Fed increases prices to combat increased prices. Does this make any sense?

Copilot
I apologize if my previous explanation caused confusion. Let’s clarify:

Interest Rates and Inflation:
Central banks raise interest rates to manage inflation, not to directly increase prices.
The goal is to strike a balance between controlling inflation and supporting economic growth.

By adjusting interest rates, central banks influence borrowing costs, which in turn affect spending and investment decisions.

Mechanism:
When interest rates rise:

Borrowing Costs Increase: Businesses face higher costs for loans, impacting their investment decisions.

Consumer Spending Adjusts: Consumers pay more for mortgages, car loans, etc., reducing disposable income.

These adjustments can slow down economic activity, potentially curbing inflation.

Complex Dynamics:
It’s not a straightforward “increase prices to combat increased prices” scenario.
Central banks consider various factors, including inflation expectations, economic growth, and employment.

Their actions aim to stabilize the economy, even if the immediate impact involves adjusting costs.
In summary, while the relationship between interest rates and prices isn’t linear, central banks use this tool strategically to maintain overall economic health. It’s a nuanced process, and the ultimate goal is stability.

You
I still don’t see how increasing business costs combats higher prices.

Copilot
I apologize for any confusion. Let’s break it down further:

Interest Rates and Business Costs:
When central banks raise interest rates, it affects businesses in several ways:

Borrowing Costs: Businesses pay more for loans, impacting their expenses.

Investment Decisions: Higher costs may lead to reduced investment in expansion, research, or new products.

Cash Flow Constraints: Debt payments become costlier, affecting cash flow.

Impact on Prices: While higher business costs don’t directly combat inflation, they influence pricing indirectly:

Supply-Side Constraints: If businesses face higher costs, they may pass some of it on to consumers through higher prices.

Demand-Side Effects: Reduced consumer spending due to higher rates can dampen demand, affecting overall price levels.

Complex Dynamics: It’s not a direct cause-and-effect relationship. Central banks aim for a balance:

Inflation Control: They raise rates to prevent runaway inflation.

Economic Growth: But they also consider growth and employment.

In summary, the connection isn’t straightforward, but central banks use interest rates strategically to stabilize the economy. The goal is to manage inflation while supporting growth.

You
You said, “Businesses pay more for loans, impacting their expenses” (which requires businesses to raise prices.) “Higher costs may lead to reduced investment in expansion, research, or new products” (which reduces supply, thereby causing shortages that lead to higher prices.) And,

“Debt payments become costlier, affecting cash flow” (which requires businesses either to raise prices or reduce production.)

And, “Reduced consumer spending due to higher rates can dampen demand, affecting overall price levels” (Dampening demand is recessionary.)

Put them all together, and you’re saying, in essence, that the Fed fights inflation by causing inflation and/or by causing a recession.

Copilot
Thank you for your thoughtful analysis! Let’s untangle this complex web of economic dynamics:

Interest Rates and Business Costs:
When interest rates rise, businesses indeed face higher costs for loans.
This can impact their expenses, cash flow, and investment decisions.

Supply-Side Effects:
Higher costs may lead to reduced investment in expansion, research, and new products.
Reduced supply can potentially cause shortages, which could contribute to higher prices.

Consumer Spending and Demand:
Higher rates also affect consumers:

Mortgages, car loans, and credit card rates increase.
Reduced consumer spending can dampen overall demand for goods and services.

The Fed’s Balancing Act:
Central banks, including the Federal Reserve (the Fed), face a delicate balancing act:

Inflation Control: They raise rates to prevent runaway inflation.
Economic Growth: But they also consider growth and employment.
Their goal is stability, not necessarily causing inflation or recession.

Complex Trade-Offs:
The relationship isn’t linear:

Short-Term Pain: Higher rates can cause short-term challenges (like reduced investment).
Long-Term Gain: But they aim for long-term stability and sustainable growth.

In essence, the Fed’s actions involve trade-offs, aiming to manage inflation without causing severe disruptions. It’s a nuanced dance, and the ultimate goal is a healthy economy.

You
Rather than fighting inflation by raising business costs and/or causing a recession, the Fed should admit it does not have the correct tool to fight inflation.

Congress and the President have the correct tool: Spending some of the government’s infinite supply of dollars to acquire and distribute the goods, the scarcity of which causes inflation.

For instance, when oil is scarce we have inflation. Federal spending to encourage drilling and refinining oil would cure many inflations.

Federal spending to help farmers grow more food and manufacturers to create more steel, computer chips, shipping, logging, etc., would lower the prices of food, steel, etc.

The Fed has one tool — interest rates — and it is the wrong tool.

Copilot
You’ve raised an important debate about inflation-fighting tools. Let’s explore the roles of both monetary policy (controlled by the Federal Reserve) and fiscal policy (controlled by Congress and the President):

Monetary Policy (Federal Reserve):
The Federal Reserve primarily uses interest rates to influence the economy.
When inflation rises, the Fed may raise interest rates to:

Reduce borrowing and spending.

Slow down economic growth.

Mitigate inflationary pressures.

Fiscal Policy (Congress and President):
Fiscal policy involves government spending and taxation.

Here’s how it can combat inflation:

Targeted Spending: Congress can allocate funds to specific sectors (like oil drilling, food production, or steel manufacturing) to increase supply and reduce scarcity.

Infrastructure Investment: Investing in infrastructure (roads, bridges, etc.) can boost productivity and reduce bottlenecks.

Subsidies: Subsidies for essential goods (like food) can stabilize prices.

Tax Policies: Adjusting taxes can impact consumer spending and business investment.

Complex Interplay:Both monetary and fiscal policies have strengths and limitations.

The Fed’s interest rate tool isn’t the only lever—it’s complemented by fiscal decisions.

In summary, a holistic approach that combines both monetary and fiscal measures is crucial for effective inflation management.

You
Agreed, with one exception. In the real world, monetary policy never has reduced inflation, though it can cause a recession.

Historically, all U.S. recessions have begun with reduced deficits.

On the other hand, fiscal policy does work—it is the only policy that works. However, Congress is reluctant to accept responsibility for controlling inflation and would prefer to blame the Fed for inflation.

Copilot
You’ve highlighted an essential debate about inflation-fighting tools, and it’s a nuanced discussion. Let’s explore the roles of both monetary policy (controlled by the Federal Reserve) and fiscal policy (controlled by Congress and the President):

Monetary Policy (Federal Reserve):

The Federal Reserve primarily uses interest rates to influence the economy.

When inflation rises, the Fed may raise interest rates to:

Reduce borrowing and spending.
Slow down economic growth.
Mitigate inflationary pressures.

Fiscal Policy (Congress and President):

Fiscal policy involves government spending and taxation.
Here’s how it can combat inflation:

Targeted Spending: Congress can allocate funds to specific sectors (like oil drilling, food production, or steel manufacturing) to increase supply and reduce scarcity.

Infrastructure Investment: Investing in infrastructure (roads, bridges, etc.) can boost productivity and reduce bottlenecks.

Subsidies: Subsidies for essential goods (like food) can stabilize prices.

Tax Policies: Adjusting taxes can impact consumer spending and business investment.

Complex Interplay: Both monetary and fiscal policies have strengths and limitations.

The Fed’s interest rate tool isn’t the only lever—it’s complemented by fiscal decisions.

In summary, a holistic approach that combines both monetary and fiscal measures is crucial for effective inflation management.

While monetary policy plays a role, fiscal policy remains a powerful tool in the fight against inflation.

Copilot hasn’t convinced me that “monetary policy plays a role,” primarily because I disagree with the notion that recessive policy is better than growth policy.

But it was good to see what I assume to be most of the Fed’s arguments, faulty as they may be, spelled out concisely.

What do you think?

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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Inflation: Why the Fed is confused

In the previous post, “Truly pitiful: Federal false helplessness in the face of inflation,” we discussed Federal Reserve Chairman Jerome Powell’s strange attempt to fight inflation by, of all things, raising prices! Yes, that is precisely what he does when he raises interest rates, his sole inflation-fighting tool. Those higher interest rates increase the prices of virtually every product and service. When businesses borrow, which most companies do, the higher interest increases their costs, which they must recoup by raising prices. When farmers borrow, which most farmers do to pay for planting, they include interest costs in their selling prices when they harvest. When you rent an apartment or house, the owner’s higher mortgage interest cost is reflected in your rental payment. You may wonder, as I do, how the Fed (and many economists) concluded that raising interest rates reduced the prices of goods and services. I suspect it comes from the belief that inflation comes from too much buying (Powell’s “overheated” economy). No one knows what an “overheated” economy is, but the phrase makes it sound like Powell knows what he’s talking about. Since raising interest rates discourages people from borrowing, that seemingly would fight inflation. Of course, inflation itself discourages people from buying, so Powell intentionally causes inflation to cure inflation. And if that weren’t nonsensical enough, discouraging people from buying is, by definition, causing a recession. In short, Powell wants to cure inflation by causing it; to do so, he tries to cause a recession without actually causing one. If you understand it, please let me know. Powell wants us to believe he is a baton-wielding maestro, using interest rates to masterfully conduct our economy as if it were a symphony orchestra, and he expertly navigates between inflation and recession. In reality, he’s more like a carpenter with only one tool, a hammer, using it to remove scratches from furniture. Here is an article that attempts to describe what I believe is the primary confusion he and his fellow economists suffer.

Inflation has a big impact on your finances and occurs when the prices of goods and services increase over time.

Inflation occurs when the prices of goods and services increase over a long period of time, causing your purchasing power to decrease.

High inflation can occur as the result of a variety of factors. However, economists often divide the root causes into two categories: demand-pull inflation and cost-push inflation.

And there it is. The common, perhaps universal, belief is that inflation either is demand-pull or cost-push. I guess you’ve heard those terms. Most economics texts contain them. But what exactly do they mean? A few paragraphs later, the article will explain. But first, a bit of misinformation:

Soaring prices are not caused by “excessive” federal spending or by low interest rates. So, inflation cannot be cured by reduced federal spending or by raising interest rates.

Inflation is a normal part of the world’s economic cycles.

The concept that inflation is “normal” and is part of the world’s “economic cycles” is designed to make you believe it’s inevitable. It isn’t. Inflation is not “normal.” It’s abnormal. Nothing is “normal” about inflations, hyperinflations, stagflations, recessions, or depressions. To call them “normal” is to call smallpox and broken legs, “normal.” And it’s not part of any economic “cycle.” The definition of “cycle” is: “A round of years or a recurring period, especially when certain events or phenomena repeat themselves in the same order and at the same intervals. To call inflations regular “cycles” is to say, “It’s no one’s fault. They just happen and are to be expected.” Inflations don’t just happen. They are caused by mismanagement and/or extraordinary events and certainly do not repeat at the same intervals.

Inflation occurs when the prices of goods and services increase over a long period of time, causing your purchasing power, or the amount of goods and services you can buy with a single unit of currency, to decrease.

In short, inflation means that your money may not be able to buy as much today as it could in the past.

That sounds exactly like what Powell’s raising interest rates does.

But why does inflation happen in the first place?

It often comes down to an imbalance between two different economic forces: supply and demand. Supply describes how much of a good or service is made and sold, and is driven by the businesses that are selling the good or service.

Demand, on the other hand, refers to how much of a good or service is purchased at a specific price, and is driven by consumers. If demand outpaces supply, inflation tends to follow.

Economists often divide the root causes into two categories: demand-pull inflation and cost-push inflation.

Demand-pull inflation is driven by an increase in total consumer demand. If consumers suddenly start spending more money than usual, businesses may find themselves selling more goods and services than they anticipated.

If these businesses are unable to keep up with the increased consumer demand, their remaining stock becomes more valuable, and prices may rise.

This kind of inflation tends to happen during periods of high consumer confidence, such as when unemployment rates are low and wages are high.

Cost-push inflation occurs when production costs rise. Unrelated to consumer demand, these increased production costs may lead to a decrease in total supply and a subsequent increase in prices to compensate.

These definitions exhibit some of the usual confusion about inflation. Inflation occurs when production costs rise (as was caused by Powell’s interest rate increases — to fight inflation).

7 Grocery Items That Could Face Shortages Next, Experts Say — Eat This Not That — **Scarcity causes prices to rise. To cure inflation, the federal government should fund increased production of scarce goods.**

However, increased production costs don’t lead to a decrease in total supply. It’s the reverse. A shortage of raw materials, parts, and labor leads to increased production costs.

This kind of inflation is commonly observed when the price of oil increases, making manufacturing operations more expensive. For example, the 1970s energy crisis was largely responsible for the cost-push inflation that occurred during that time period.

The energy crisis of the 1970s was very simply an oil shortage causing prices to increase—period. In fact, all inflations in history have been caused by shortages, most recently shortages of oil and/or food. The still-current inflation was caused by COVID-19, which led to shortages of oil, food, lumber, steel, paper, computer chips, labor, and almost any other product or service. It was not “cost-push.” It was not “demand-pull.” COVID-19 kept people home. We had a shortage of labor, which led to other shortages. There is no “demand-pull inflation.” Consumers did not “suddenly start spending more money than usual.” They never do. Consumers might suddenly start buying Furby dolls, Taylor Swift albums, or Ozempic® for weight loss, but consumers never suddenly start spending more money. As for “cost-push” inflation, this is akin to saying, “The cause of inflation is inflation.” Cost-push is a meaningless definition. Every inflation in world history has been caused by a shortage of critical goods and services, notably oil and/or food, which then causes other products and services to suffer shortages.

It’s also possible for inflation to result from factors unrelated to the economy. Natural disasters or major world events can disrupt supply chains and reduce the amount of goods available, driving up prices on the stock that remains. It’s also possible for a combination of these factors to occur simultaneously or for one to occur as the result of another.

In other words, all inflations are caused by shortages and not by excessive government spending, as so many economists claim.

How does inflation affect interest rates? Inflation is a complex issue, but one way to control it is through federal monetary policy.

When the Federal Reserve — America’s central banking system, also known as the Fed — detects rising inflation rates, it responds by raising the federal funds rate. This is a special interest rate related to lending between commercial banks.

An increase in the federal funds rate causes a corresponding rise in interest rates on auto loans, mortgages and other types of credit, making it more expensive to borrow money.

Increases in the cost of borrowing money can help to slow down consumer and business spending, allowing supply chains to catch up to the production of goods and services, which can in turn lead to a drop in prices.

Fed Chair Powell tests positive for COVID-19, working from home | Reuters — **Jerome Powell seems to say: “I cure inflation by raising the prices of everything you buy. If I were a doctor, I would cure anemia by applying leeches. Do you understand?”**

Said simply, “The increased cost of borrowing increases the cost of goods and services, aka ‘inflation.’ The Fed fights inflation by causing more inflation.”

Ideally, this curbs inflation and stabilizes supply and demand without longer-term consequences such as a recession. When inflation is low once again, the Fed may decide to decrease interest rates, making it easier to borrow money and encouraging spending.

Wait! If high interest rates cure inflation, one should expect low rates to cause inflation. But that hasn’t happened. For much of a decade, interest rates approached zero, and inflation was low. Only when the COVID-caused shortages hit did we have inflation. The cause of inflation is scarcities of critical goods and services, mostly oil and food; how should we cure inflation? Cure the scarcity of oil and food. Although Congress assigned the cure-inflation assignment to the Fed, Congress and the President have the tools to cure inflation, while the Fed does not. The federal government has the infinite power to create stimulus dollars that would help the producers of scarce products to produce more. Are we short of oil, food, computer chips, lumber, steel, paper, and shipping? Then, the federal government should give money and tax breaks to domestic producers and importers to alleviate the shortages. Don’t try to cut federal spending, as many economists advise. Contrary to popular wisdom, federal spending has never caused inflation. If directed appropriately, it can cure inflation. Those vivid photos of people pushing wheelbarrows full of currency are misleading. Printing higher currency paper didn’t cause hyperinflation; it was a harmful response to existing shortages. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

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Truly pitiful: Federal false helplessness in the face of inflation

The Federal Reserve Chairman, Jerome Powell, is valiantly battling against stubborn inflation. He raised interest rates and continues to keep them high, but no matter what he does, inflation continues to mock him.

Why you get paid to donate plasma but not blood - STAT — **We took this much blood out of him, but he still has anemia, so we’ll continue to draw blood until his anemia is cured.**

In a related story, medical doctor Dr. Jerome Powell has been valiantly battling a patient’s anemia by applying leeches. But, for some unknown reason, the anemia is not responding to the blood draw, so Dr. Powell will continue to apply more and more leeches. Doctors and economists the world over wonder why drawing blood doesn’t cure anemia and increasing costs by raising interest rates doesn’t cure inflation.

Americans are falling behind on their credit card bills.

Nearly one in five credit card users have maxed out on their borrowing, according to the Federal Reserve Bank of New York.

People under 30 and those who live in low-income neighborhoods are more likely to be at or close to their credit limit.

Don’t those people realize that Jerome Powell is trying to help them pay off their loans by increasing interest rates?

The debt is a sign borrowers are feeling the strain of rising prices and high interest rates.

“Most investors now think it’s going to be September before the Federal Reserve is ready to start cutting interest rates,” NPR’s Scott Horsley tells Up First.

Yes, another couple of months of drawing blood from the patient should cure his anemia, and another couple of months of increasing prices by raising interest rates should cure inflation.

Though inflation has come down from what it was several years ago, prices are still climbing faster than most would like.

How To Become A Car Salesman? | DARCARS Automotive Careers — **Used car salesman Jerome Powell: “We charge you the highest interest rates to make your car more affordable.”**

Perhaps increasing the cost of borrowing (which virtually every corporation, farmer, home buyer, car buyer, and appliance buyer does) will cure inflation.

More than half of all credit card users pay their whole balance every month, so they’re not affected by high interest rates.

But the other half pay interest on their purchases, so they are affected. But don’t worry, Chairman Powell assures us that raising interest rates reduces the cost of everything (with the exception of everything you buy).

Because of this, there’s no incentive to stop spending, which makes it hard to get inflation under control.

Now, if everyone simply would stop spending, the resultant recession and depression might cure inflation. Then again, there is a thing called “stagflation,” which is a combination of inflation and economic stagnation, so maybe the recession thing isn’t such a good idea. Oh, someone mentioned that high oil prices cause inflation and that interest rate increases exacerbate inflation. Ah, but those people were just using facts, not rumors and beliefs, so who could trust them? Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

How not to protect American industry. Be bipolar.

Here is the situation: Chinese manufacturers, possibly with the financial aid of the Chinese government, are taking business from key American industries. Quality and other marketing factors are not the real issues. The Chinese companies are doing this with low prices.

Man Pointing Gun At Camera On A Brick Wa... | Stock Video | Pond5 — **I’m taking your money so you will buy American-made goods. I know this makes no sense, but I’m the government. Trust me.**

How should the American government protect these important industries? The American government essentially has two alternatives:

It can force American consumers and businesses to pay higher prices for Chinese goods while taking growth dollars out of the U.S. economy, or
It can help American consumers and businesses to pay lower prices for American goods while adding growth dollars to the U.S. economy.

Which alternative is better for American consumers and businesses? The Biden administration, and the Trump administration before it, have chosen alternative #1: Higher prices for Chinese goods and reducing Gross Domestic Product by taking dollars out of the economy. For reasons beyond logic and common sense, both administrations believe American consumers and businesses should pay higher prices for important commodities, and somehow this not only is beneficial but won’t be inflationary. So they add high taxes, which Americans pay, to the prices of Chinese goods. The alternative, of course, is to give American manufacturers tax breaks or other financial support, so they can compete on prices. That, in fact, is the primary purpose of federal taxes: To control the economy by giving tax breaks to what the government wishes to encourage. Increasing federal taxes should only be a last resort, a punishment when a reward doesn’t work. Federal taxes do not fund federal spending. They are a tool for federal economic control. But rather than use that tool, the federal government has chosen to punish American consumers with higher prices.

Biden announces new tariffs on imports of Chinese goods, including electric vehicles MAY 14, 20245:01 AM ET Asma Khalid

President Biden will slap tariffs on $18 billion of imports of goods from China including electric vehicles, semiconductors, and medical products to protect the strategic sectors and punish China for unfair trade practices.

Joe Biden: The President | The White House — To reduce inflation, my Inflation Reduction Act will give American businesses money so they can produce more, and charge consumers less. Then I’m going to charge those same consumers more with my new tariffs. Makes sense to me.

He could have given tax breaks and other financial support to America’s manufacturers of electric vehicles, semiconductors, and medical practices, thereby saving American consumers money and fighting inflation.

He will also keep in place the tariffs that former President Donald Trump had placed on more than $300 billion of imports from China.

He correctly criticized Trump for the tariffs that are paid for by American consumers.

Treasury Secretary Janet Yellen said in a statement that she raised concerns last month during a trip to Beijing about “artificially cheap Chinese imports,” concerns that she said many other countries share.

She said the new tariffs are necessary to protect American workers and companies from what could become a flood of unfairly traded products.

This “protects American workers and companies” by making them pay more for the products. Some protection that is.

The move comes as Biden pushes forward to implement three pieces of legislation that contain hundreds of billions of subsidies to boost the domestic manufacturing and clean energy sectors— and ahead of a presidential election where trade and jobs will again be an issue.

The Biden administration suffers from bipolar disease. On the one hand, they subsidize industries, and on the other hand, they charge them more in taxes.

“We know China’s unfair practices have harmed communities in Michigan and Pennsylvania and around the country that are now having the opportunity to come back due to President Biden’s investment agenda,” Lael Brainard, Biden’s top economic adviser, told reporters.

His investment agenda is good, but it’s being undone by his import duty agenda. Additionally, duties take dollars out of the economy, which by formula, reduces Gross Domestic Product. This is a recessionary act. If instead, the Biden administration stuck with subsidies, this would add dollars to the economy, a growth act. Between growth and recession, Biden chose recession.

Here’s a list of the new tariffs. Most of the new tariffs cover items that the Biden administration has sought to have made in America through investments in the Inflation Reduction Act, the CHIPS and Science Act and the Bipartisan Infrastructure Law.

Some increases will take place this year. They include tariffs of:

100% on electric vehicles, up from 25% 50% on solar cells, up from 25% 50% on syringes and needles, up from zero 25% on lithium-ion batteries for electric vehicles, and battery parts, up from 7.5% 25% on certain critical minerals, up from zero 25% on steel and aluminum products, up from a range of zero to 7.5% 25% on respirators and face masks, up from zero to 7.5% 25% on cranes used to unload container ships, up from 0% China makes cheap electric vehicles. Why can’t American shoppers buy them?
Other hikes will be phased in, including:
50% on semiconductors, up from 25%, by 2025 25% on other lithium-ion batteries, by 2026 25% on natural graphite and permanent magnets, up from zero, by 2026 25% on rubber medical and surgical gloves, up from 7.5%, by 2026

The White House says this is different from Trump’s approach.

No, it isn’t different. Give it any name you can invent and it still is a tax on purchases. It still takes dollars out of the economy. It still punishes consumers. It still is inflationary and recessionary.

Trump had made tariffs on China one of his signature policy moves when he was in the White House. At first, some Democrats warned this could really hurt the economy — and that American consumers would pay the price.

Biden’s team began reviewing those tariffs when he took office, and now has decided to keep them in place.

“One of the challenges is once tariffs have been imposed, it is quite difficult politically to reduce them — because the affected industry tends to get used to them, like them, operate with them as baked into their plans,” said Michael Froman, who was U.S. Trade Representative during the Obama administration.

It would be far more beneficial to the economy and consumers for industries to “get used to” subsidies, which grow the economy than to get used to taxes, which are inflationary and recessionary.

The White House has tried to distinguish its strategy from Trump’s approach.

It points to comments made by Trump in rallies and interviews that he would broaden tariffs on all imported goods, including targeting Chinese cars, if he wins the election — something that they said would hike consumer prices.

Huh? Taxes on Chinese cars would hike consumer prices, but taxes on the above-listed items will not hike consumer prices???

The White House has downplayed the risk that the new tariffs could spark retaliation from China, saying that the issues have been discussed during meetings of top U.S. and Chinese officials, and were unlikely to come as a surprise.

One could only hope that the Chinese government is as foolish as the American government, and increase tariffs on imports of American goods. That would be a blow to the Chinese economy. SUMMARY Raising federal taxes on the American consumer takes dollars out of the American economy, raises prices, and costs consumers money. It is the worst possible step the government could take. To protect American businesses, the government should rely on tax breaks and other forms of financial support, which would add growth dollars to the economy and lower inflationary prices. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

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