Former budget director Mick Mulvaney recently wrote that inflation “is too much money chasing too few goods.” That he was incorrect about inflation doesn’t indict him as much as it places him in a crowded room with countless other economists, pundits and politicians who’ve long succeeded in failing to define what inflation is.
The simple truth is that money never buys or sells goods, services, and labor. In truth, goods, services and labor buy goods, services and labor. Explained more simply, market goods chase market goods, period.
No one exchanges market goods for money as much as they bring goods to market in order to get roughly equal value. We produce so that we can get. Again, market goods for market goods.
No doubt Mulvaney and others would protest that when they buy market goods, they’re exchanging dollars for them.
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