Policymakers have pushed inflation at any cost with the most aggressive monetary policy in decades and it took a normal recovery after the re-opening to prove why inflation is always a monetary phenomenon: In 2020 G7 central banks increased money supply well above demand and faster than ever since 2009. This led to massive inflation spikes in essential goods and services. The rhetoric of “transitory” inflation and “supply chain disruptions” has been rapidly debunked. We have seen three CPI (consumer price index) prints after the so-called base effect ended and prices continued to rise. Furthermore, the price of commodities where there is overcapacity has risen as fast as others. Inflation is always more money chasing scarce assets and that is the reason why we see shipping or aluminium rise to all-time highs when there is ample capacity in the segment, even excessive capacity.

Monetary history shows that policymakers always resort to the same excuses when it comes to printing money and monetary mismanagement: First, say there is no inflation, second, say it is transitory, third, blame businesses, fourth, blame consumers for overspending, and finally present themselves as the “solution” with price controls, which ultimately devastates the economy.

In the United States median wage growth has been more than offset by inflation, and in the eurozone wage growth plummeted in July.

In fact, the risk in the eurozone is higher as average hourly wages fell in year-on-year terms in the second quarter.

Consumers see the prices of the goods and services they buy every day rise significantly faster than the official CPI shows and this, in turn, derails the economic recovery that was supposed to come from a less-than-likely consumption boom and services boost to above-trend growth in 2021.

None of those Keynesian miracles happened.

As policymakers continue to implement massive financial repression measures, the problem is likely to get worse into winter. No government or central bank seems willing to reduce the speed of fiscal or monetary imbalances because they benefit from rising inflation. Does anyone believe there will be strong policies to reduce inflation from the same central banks that have pushed trillions into the economy to attract inflation and the same governments that would benefit from inflation to dissolve a bit of their rising debt?

We are now in the step where governments blame businesses.

Biden blamed rising gas prices on “profiteering” and one of his main economic advisors at the National Economic Council Brian Deese said pork, chicken and beef prices rose faster than normal because four companies controlled the supply.

In Spain, the government blamed electricity producers for a rise in power prices that came from higher CO2 costs -a tax from which European governments will collect around 20 billion euro in 2021-, thus the government was effectively profiting from the rise in CO2 prices and at the same time blaming businesses for it. This was also part of the heated debate in Germany. Power prices soared due to high natural gas and CO2 prices and political parties blamed speculation and power companies.

This is what will likely intensify into the third quarter; Governments blaming businesses for causing the inflation that policymakers have fuelled.

Then, present themselves as the solution and impose price controls, destroying the business fabric, particularly small enterprises.

Keynesian policies always destroy what they pretend to protect. In this case, middle classes, real wages, and small businesses are being wiped out by the inflation tax and the increase in other taxes, as governments reap the benefit of inflationary policies increasing the size of the public sector on the way in, deficits and QE, and on the way out, inflation and taxes.