Inflation: How Can Governments Reduce and Fix Inflation? 
By Walter Sorochan Emeritus Professor San Diego State University

Posted May 24, 22022.

There are numerous reports pointing out that USA inflation can be reduced and even fixed. Supporting such information is provided below.

Fareed Zakaria, Washington Post columnist and host of CNN's Fareed Zakaria GPS, pointed out on May 20, 2022, that President Biden has the means to reduce inflation but is not acting. Biden could take two major steps to change Trump's policies:  Zakaria: Biden not curbing inflation 202

"1. Repeal tariffs: Repeal of most or all of Donald Trump's tariffs would be the single most effective way of reducing inflation in the near future."

"2. Immigration reform: reversing Trump's restrictions on immigration which cause severe worker shortages in farming, industry, construction and health care."

Supporting repeal of tariffs: The Peterson Institute for International Economics estimated that reversing most of Trump tariffs would reduce inflation by 1.3 percentage points." : Zakaria: Biden not curbing inflation 202

There is no proof that doing these two steps would fix inflation!

According to Steve Forbes and his group, the most powerful solution to inflation is a return to a sound dollar whose worth is defined by a fixed value of gold.  :Forbes: Best inflation cure cancelled by Washington 2022 Forbes and his team had Amazon publish all this information in their book INFLATION in 2022.  Forbes: Book Inflation 2022 This point of view has been ignored by the President Biden's advisors for obvious but hidden reason .... Washington would be limited in printing money.

Attaching gold to the American dollar needs some clarification:

"With only a few interruptions, the U.S. maintained a gold standard system for 180 years, until 1970. That was when Washington terminated the post-World War II Bretton Woods Agreement which set the dollar’s value at $35 an ounce of gold. Under a gold-backed dollar, Americans enjoyed the greatest economic growth rate in history. Yet economists then, and now, persist in ignoring this record."  :Forbes: Best inflation cure cancelled by Washington 2022 President Richard Nixon took gold off the American dollar in 1971, making the dollar unstable.

The problem with inflation-fighting approaches like price controls is that they focus on symptoms and not the cause. Price controls cause a decline in the value of currency. Co-author Mathan Lewis, the world's leading authority on money, refers to such decline as "The Magic Formula." This magic is stable money and lower taxes. The best way to end today's inflation is to return to the gold-based money."  Forbes: Book Inflation 2022

On the other hand, UBS Chief Economist Paul Donovan's approach to governments fixing inflation is to do nothing.  Marchant: Why inflation is so high? 2022

Jerome Powell, chairman of Federal Reserve, approach to fixing inflation is to keep the money printing presses rolling, play with tariffs, wage controls and raise Federal Reserve borrowing interest rate to banks. All of these approaches exacerbate inflation. Powell subscribes to Modern Monetary Theory [MMT] which is controversial. The government prints fiat money that adds to the inflation misery.

So, who has the best fix? Well, we need more information about money, purchasing power and measuring inflation.

What is money?: Money is a measure of worth:  Forbes: Book Inflation 2022

Money was invented to enable trade between strangers by providing a mutually-agreed-upon unit of value. In other words, it is a facilitator of trust. Markets are people and not goods. When money is no longer a reliable unit of value, trade and trust unravel. We end up with inflation.

For markets to function, the value of money must be stable. That is why the dollar needs collateral like gold to stabilize it and give it real value. The government is eroding the value of the dollar by allowing out of control inflation. When a currency loses value, society as a whole loses.

So .... what are countries doing to control or fix inflation? Interesting, in searching on the internet for an answer to this question, there are no answers! It is a forbidden fruit!

Purchasing Power: Inflation just means the decline of your purchasing power over time. Simplified: What does $20 in 2015 buy you compared to $20 in 2021? Instead of asking yourself “how can I make more money?” ask yourself “how can I protect my purchasing power?”  Purchasing power is related to the value of your fiat American dollar. Fiat means that the dollar has no backup or collateral to give it exchange real value. But if you measure the value in digital currencies or gold, you get a very different picture.  Forbes: Book Inflation 2022

Lets look at how inflation is measured: The government does this by CPI [consumer price index]. The Consumer Price Index is supposed to measure the cost of living. It is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. The catch here is that the money invested in consumer goods and services in the CPI basket is not the same as what we really buy. We need to measure inflation on things we actually buy. So CPI does not measure the true cost of living of all classes of society and races. Hence CPI is not an accurate barometer of inflation. Yet that is what America uses.

Inflation affects various classes of society and races differently.

The Chapwood Index: was created by economist Ed Butowsky  Butowsky: Chapwood Index to calculate and track the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items, including taxes, energy and food [which are *not* included in the official CPI] on which Americans spend their after-tax dollars in the 50 largest cities in the United States. The purpose of this index is to let people know that, if you live in California, your cost of living increase goes up somewhere between 12-13.5% a year.

The average annual cost of living increase calculated by the Chapwood Index is around 10%. For comparison, the CPI claims it has increased less than 2% per year for the past decade. That’s over 5x less. And if you're not making 13% more in salary, then you're losing purchasing power; and that's why people fall further and further behind. If you are in New Mexico, it's about 7%.

The Chapman Index exposes why middle-class Americans, like salaried workers, who are given routine pay hikes and retirees who depend on annual increases in their corporate pension and Social Security payments can’t maintain their standard of living. Plainly and simply, the Index shows that their income can’t keep up with their expenses, and it explains why they increasingly have to turn to the government for entitlements to bail them out.

The exemplar table below gives the Chapman Index for 10 cities. It tells you which are the most expensive cities to live in:

 Chapwood Index:

The CPI rose 0.8 percent in 2014. But in San Diego, the Chapwood Index for a five year average shows that the real cost of living increase was 12.6 percent. This means that if you work in the San Diego area and got an 0.8 percent raise in your salary, it wasn’t nearly enough to cover the increase in your day-to-day expenses. It was especially bad in San Jose, CA, where the Chapwood Index shows a 13.7 percent rise in the cost of living.

To find out how expensive it is to live in your city click on:  Butowsky: Chapwood Index

Conclusion: Inflation  today reduces the purchasing power of the dollar. There are numerous ways to fix inflation but the government is not doing it.

Amadeo Kimberely, "How the Federal Reserve Controls Inflation," The Balance. May 04, 2022  Amadeo: How Fed Reserve controls inflation 2022

Butowsky Ed, "Chapwood Index - The real cost of living increase index vs Consumer price Index,"  Butowsky: Chapwood Index

Denning Tim, "You Are Being Lied to About Inflation. It Hasn’t Been 2% for 30 Years (Here’s Proof," January 12, 2021.  Denning: Lies about inflation 2021

Dooley Ben, "Inflation? Not in Japan. An that could hold a warning for the U.S,," New York Times, May 26, 2021.  Dooley: Inflation in Japan 2021

Forbes Steve, Nathan Lewis, Elizabeth Ames, "How the best inflation cure was 'cancelled' by Washington," Fox Business, May 4, 2022.  :Forbes: Best inflation cure cancelled by Washington 2022

Forbes Steve, Nathan Lewis and Elizabeth Ames, Book: Inflation: What it is, Why its bad and how to fix it, Amazon, 2022.  Forbes: Book Inflation 2022

Kramer Lesslie, "How Do Governments Reduce Inflation?," Investopedia, May 13, 2022.  Kramer: How Govts control inflation 2022

McMahon Tim, "Worldwide Inflation by Country 2022,", May 21, 2022.  McMahon: Worldwide inflation 2022

Marchant Natalie, "Why is inflation so high and will it stay that way? An economist explains" World Economic Forum, May 12, 2022.  Marchant: Why inflation is so high? 2022

Rushe Dominic, Phillip Inman, Jennifer Rankin, Kim Willsher, Peter Hannam, Justin McCurry and Martin Farrer, "How world’s major economies are dealing with spectre of inflation," Guardian, November 26, 2021.  Rushe: world dealing with inflation 2021 

Zakaria Fareed,"Biden has means to curb inflation but isn't acting," Charleston Gazette-Mail, May 20, 2022.  Zakaria: Biden not curbing inflation 2022