Outflation
A few weeks ago, I chose this word to describe:
all economic forces affecting the Consumer Price Index (CPI) that are NOT inflation.
I wanted a single word to represent the non-inflation economic forces. At that moment, outflation seemed appropriate in that it contrasts its out- against the in- of inflation.
But this selection was to go down my similar thought path of deflation and stagflation, which I have deplored as nonsensical versions of ***flation. Ruminating on outflation further, it can be too easily misapplied to mean the opposite effect of inflation, somewhat like deflation. And deflation carries the incorrect notion that inflation can be reversed.
Regardless, ditch outflation. Instead, we will use normal.
[Sorry for the indecision on the word choice, but we must endeavor to upgrade the language, including our (my) language whenever it fosters a better discussion. And discussion of this subject is naturally unwieldy.
Normal is used in several specific technical applications. I am fluent with its usage within the discussion of friction as the expression, normal force, is applied. And many know of its meaning in the concentration of solutions as in normal solution.]
Henceforth, normal economical forces (NEF) are regarded as those economic forces other than the one singular economic force we know as inflation. And normal fits the non-inflation forces in contrast to the inflation, which I see as para-normal or abnormal. I assert this as I regard inflation as unnatural, ubiquitous, invisible, and an immeasurable ether in which natural trade is suspended and cannot escape once an injection of empty money—money not representing the production of goods and services—is made into the money supply.
So with the critical terms fundamental to our discussion momentarily settled—at least in my mind—there are several major categories of NEF that affect the CPI. Scarcities and gluts are the two major categories, but this observation obscures the fact that there are others such as taxes, fines, licensure, permitting, tolls, and patenting. And these arise from many sources, many of which are from the government(s) as well as from private businesses.
The point of this article is to show the vast number and variety of NEF. All of these can cause increases or decreases in the CPI and are never inflation. Often, the NEF causes far more CPI fluctuation than what inflation can produce, but this ratio can be flipped when the money supply is quickly and continuously devalued to the extent that prices skyrocket in the presence of commodity surpluses across the board.
To get a glimpse of the current economic turmoil in the UK watch the following video. I greatly respect the analysis of Alexander Mercouris, but I suspect he conflates inflation (not mentioned) with the CPI (~23 minutes):
Taxes and Blame Putin. Sunak, Hunt Strategy to Fix UK Economy
Governmental NEF
The federal government of the United States can both produce inflation and indirectly influence inflation. The difference in produce and influence is important.
As I continuously hammer, only the Federal Reserve can produce inflation by its creation of empty money. But in a sense, all the departments of the government can influence inflation. That is, they might exceed their budgets, thus deficit spend. This does not produce the inflation; however, it leaves the government in debt and this debt is eventually monetized by the Fed to produce the inflation.
Regardless of how we dice it up, the Federal government is totally to blame for inflation. But let’s examine some of the ways the government(s) are to blame for NEF effects on the CPI.
Taxes, although passed by the Congress, do not affect or effect inflation, but they do affect the CPI. And many of the different government agencies (federal, state, county, municipal) and departments may impose their taxes, mandates, ordinances, codes, sanctions, and exact fines and other penalties.
Some of the major governmental departments and agencies are briefly described (bulleted):
The Environmental Protection Agency (EPA) and the Occupational Safety and Hazard Administration (OSHA) can ultimately shutter businesses or force them into bankruptcy for code violations.
The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) has jurisdiction to tax and fine and imprison infractors of its provisions and statutes. This, of course, adds costs to products within its purview.
A local building inspector can condemn a building, thus forcing occupants to move businesses and incur costs to products.
And a local fire department can cost a business megabucks enforcing new fire codes. A dentist I know muttered that it cost him money every time the local fire chief visited his office. And, of course, this cost must be passed on to the dental patients.
Such government actions might curtail the production of a certain commodity, thus decreasing the availability (hence, cause scarcity) of that commodity and pushing its price upwards.
And local and state taxes are sometimes suspended to lower the prices of commodities like gasoline, diesel, school supplies, hurricane preparations, solar panels, and roadway tolls. But let’s admit that the suspension of such taxes is merely a respite from the economic constraint the government is already imposing. It takes, then gives back, as though it made a contribution when it merely reduced the economic pain it originally caused.
And if government can protect us from some malady—perhaps a disease that costs the economy—then the prices of some commodities might decrease or be paused from increase.
Although there are exceptions, as already mentioned, note that government action rarely lowers the price of a commodity. All taxes must be factored into the cost of products, hence the IRS and the state and local tax assessors drive up prices. Almost all government action, good or bad, results in constraint of trade.
The Office of Trademarks and Patents, although it ostensibly provides services to protect businesses, creates costs that are ultimately passed on to the consumer.
The Food and Drug Administration (FDA) ostensibly works to protect consumers from harmful foods and to regulate drugs to keep us safe and well. However, their regulations often unnecessarily increase costs as well as make natural remedies more costly or extremely difficult to acquire. They also approve and authorize medications that damage our health. [I strongly recommend The Primal Prescription by Doug McGuff, MD, and Robert P. Murphy, PhD, wherein the authors explain the medical delivery system both from the perspective of an emergency care physician and an economist.]
The Department of the Interior might allow or prohibit oil and gas and coal exploration and drilling/ mining on government lands or Indian lands. Their actions affect almost every commodity on the CPI, but not inflation.
The Department of Energy might award or deny oil leasing and permits to drill for gas and oil or for mining coal. It, along with other departments and agencies, restricts the use of pipelines to convey biomass fuels. Their actions affect almost every commodity on the CPI, but not inflation.
The Department of Labor (DOL), along with the states, sets the minimum wage and awards money to programs to assist in employment programs. It also provides labor statistics.
The Department of Defense (DOD) can erect military bases inside or outside the United States and act on the foreign policies of the United States State Department. In so doing these things and other military related programs, commodities are consumed, land is occupied, hazardous material is processed and its waste is produced. Localities are often covetous to sponsor new military bases since they are thus provided with indirect economic opportunities from tax monies.
The Department of Homeland Security (DHS) plays a central role in the administration matters concerning immigration and migration. In an earlier article, we explored how human osmosis can affect the CPI.
The Federal Department of Agriculture (USDA) overlaps with the FDA in the regard of protecting our food supply. And state departments of agriculture impose state gasoline taxes as well as control the issuance of local firearm permits.
The Federal Department of State determines our country’s relationship with all the other countries of the world. It often determines the pretext for wars for the DOD.
The Federal Department of Transportation (DOT) enacts statutes to protect us while traveling by land, water, and air.
As Arthur Jones stated, “I pay very little tax because I invest it in the business. And I would much rather do that than give it to the federal government and let them waste it.”
All departments and agencies of the federal government float programs that place demands on the budgets within their respective purviews and hence, can indirectly influence inflation to be produced by the Federal Reserve. They all comprise a portion of the NEF that affect the CPI. However; only one entity of the federal government—and only in the federal government—can directly produce inflation and that is the Federal Reserve via its printing of empty money.
[And note that none of these agencies within the federal government are directly controlled by the congress nor are their secretaries directly affected by voting. The specific secretaries can be changed by the President or by congressional review and impeachment, but this often does not result in the policy changes carried out by the rank and file, at least not in a timely manner.]
[I leave the reader to consider several additional federal agencies that we ascribe to NEF. Among others, they are the Social Security Administration (SSA), the Securities and Exchange Commision (SEC), the Federal Bureau of Investigation (FBI), the Department of Justice (DOJ), Housing and Urban Development (HUD), the Federal Emergency Management Agency (FEMA), the Department of Education (ED), Health and Human Services (HHS). How do we manage to pay for all of this?]
Non-governmental NEF
Of course, there are other—non governmental—normal economic forces (NEF) that act on the CPI. As I showed cursorily, the governmental NEF are numerous, but the non-governmental are many more, seemingly infinite. And it’s natural that the government would ideally, but not practically, like to be able to address them all. [Hence, I facetiously suppose that the government has some catching up to do. It must continue expanding to encompass control over every natural possibility.]
For the non-governmental NEF we have droughts, floods, pestilence (locus, blights, canker, termites, coyotes, snakes, deer, rabbits, squirrels, beetles, etc.), hurricanes, blizzards, tornadoes, earthquakes, volcanoes, sun spots, dust storms, vandalism, theft, fires, boycotts, union strikes, riots, immigration, migration, war, disease, epidemics, pandemics, asteroids, over-population, de-population, under-population, death rate, birth rate, surpluses, avalanches, erosion, corrosion, subsidence, glacier melt, glaciation, etc. At first, I included gleaning, but then removed it.
Therefore, there is an almost endless number of possible NEF that DO affect the CPI but DO NOT effect or affect inflation, while there is ONLY one direct producer of inflation of the currency we use in the United States… our Federal Reserve. And while the Federal Reserve does not physically print empty money, only the Fed directs the creation of the money supply in its various mysterious ways:
Understanding How the Federal Reserve Creates Money