“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
— Milton Friedman, American economist and educator, one of the leading proponents of monetarism in the second half of the 20th century.
We feel it at the gas pump. We feel it at the grocery store. We feel it when the cable bill comes due.
Rising prices are quickly impacting Cochise County residents and threatens a more serious consequence than other areas of Arizona and the nation. Unlike the Phoenix area where high-paying jobs are not uncommon, the median household income in this corner of Arizona was still under $50,000 two years ago and hasn’t changed in more recent surveys. That compares with $78,500 nationally, and just over $61,000 for Arizona.
The poverty rate in Cochise County — a measure of factors that demonstrate impoverishment — is 16.6 percent, compared with a national average of 9.2 percent and a state average of 13.5 percent.
Solutions proposed by the Biden Administration — which has already spent $2 trillion for Covid-19 relief — is more government spending and expansion of social programs to aid those in financial distress.
Last week’s jobs report should have dampened enthusiasm for those solutions. Economists projected more than one million Americans would return to the workforce in April, fueling the post-Covid recovery. Instead, less than one-third of that projection (about 266,000) started new jobs last month.
The disappointing number is explained with starkly differing responses. The Biden Administration has pointed to fear of workers getting sick, inability of families to arrange daycare and some schools remaining closed.
Opponents contend the weak jobs report comes at a time when employers are aggressively advertising for workers, the rate of vaccinations has topped one-third among Americans, and government unemployment benefits are still plentiful. Some people, they argue, are making more money staying home than going to work.
What isn’t being mentioned much is the dramatic increase in currency now flooding the American economy. Amid a massive influx of cash from fiscal and monetary authorities, total currency in circulation soared to $2.07 trillion at the end of 2020, according to Federal Reserve data.
That marked an 11.6 percent gain from a year earlier and was the biggest one-year percentage increase since 1945, as the nation was coming out of the war and the military-industrial complex took hold.
As we are witnessing, and like Friedman predicted, the increase in the quantity of money contributes directly to inflation, resulting in the devaluation of the dollar and a reduction in buying power.
When dollars are “cheap,” things cost more.
Considering Cochise County’s above-average poverty rate, the impact of things costing more will be greater for those already in financial distress, compared to other areas in Arizona and across the country.
The belt-tightening has just begun.