Inflation is back in the headlines this week. The federal government latest data show that consumer prices increased by 7.5% from January 2021 to 2022. This is the highest rate of price inflation we have seen in almost 40 years!

What does this mean for everyday American families?

A new analysis from Moody’s Analytics reports that the average US household pays an extra $250 a month thanks to this inflation.

“A lot of people are hurting because of high inflation,” said Moody’s senior economist Ryan Sweet. Recount the the wall street journal. “$250 a month is a big burden. This really hammers home the point of “what is the cost of inflation?”

This disturbing revelation highlights something we already knew about inflation: it is the working class that suffers the most. While $250 a month is hardly a noticeable increase for millionaires, it could easily strain the budget of a working-class or even middle-class family beyond its breaking point.

Price inflation also erodes Americans’ hard-earned savings in a way that is just as painful as the government directly raises their taxes. As the economist Ludwig von Mises wrote, inflation is when “money, like chocolate on a hot oven, [is] melt into the pockets of the people.

This is exactly what we are experiencing. But that leaves us with a bigger question: why are we seeing this spike in consumer prices? Is it an abstract economic phenomenon beyond our control? Is it due to “corporate greed”?

On the contrary, inflation can be traced directly back to decisions made by our elected (and unelected) government officials.

“The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that strikes like the plague,” Mises explained. “Inflation is a Politics.”

The main cause of current inflation is the decision of the Federal Reserve, the US central bank that controls the US dollar, to create trillions of new dollars out of thin air to ostensibly “stimulate” the economy during the pandemic.

Federal Reserve Chairman Jerome Powell openly admitted this in a maintenance with CBS.

The mystery of inflation.

“You have flooded the system with money.”

“Yes.” pic.twitter.com/2ClRf97fg7

— Jon Miltimore (@miltimore79) January 17, 2022

“[Is it] fair to say that you simply flooded the system with money? asked a reporter.

“Yes,” he answered. “We were doing. That’s another way to think about it. We were doing.”

“Where did this come from? Did you just print it? the reporter followed.

“We print it digitally,” Powell replied. “So as a central bank, we have the ability to create money digitally…which actually increases the money supply. We also print real money and distribute it through the banks of the Federal Reserve.

To understand what “flooding the system with money” looked like, just consider the following graph of the money supply – and how much it soared at the start of 2020.

How does increasing the amount of money available cause prices to rise?

As FEE economist Peter Jacobsen said Explain“If more dollars chase the exact same goods, prices will go up.”

We watch this Econ 101 lesson unfold before our eyes. And it’s a painful lesson indeed for the millions of American families who have hundreds more of their monthly budgets just to tread water. Let’s hope our decision makers learn from their mistakes before the situation even gets worse.