This is a good lesson for those who think the state should have more influence over the economy, and how good intentions can have dire consequences. Economies are based upon value, and the creation thereof. Money is a medium for exchanging the value of labor, it has no intrinsic value of its own. The value of money is nominally tied to the amount of value in the economy. From 2020 western governments flooded their economies with money in the form of pandemic relief. In America, more than 40% was added to the money supply. While the state can regulate the amount of money in the system, and can regulate the dollar cost of labor, it cannot regulate value. The most obvious effect of adding 40% to the money supply without a corresponding increase in value, is that the value of wages and savings must fall by 40%, meaning prices must go up by 40%. Other policies were also inflationary. Eviction moratoriums increased risk to landlords, who increased rents to offset that risk. An epidemic of retail theft led to higher prices as retailers had to increase them to offset their losses. The tariffs enacted by the current administration were also highly inflationary.

The loss in value in our currencies has made things much more expensive than they formerly were. This has pushed down consumption, making it harder for the economy to generate value, which puts negative pressure on wages, meaning that things cost more, but people aren't earning more. You can argue that the state should force businesses to pay higher wages. But, once again, though the state can regulate the price of an hour of labor, it cannot regulate value, period, and such increases would only make inflation worse. Think of money being like a bucket in which you carry the value of your wages and savings. Mandating higher wages is like giving people larger buckets, the only problem is that the value contained inside remains the same. Raising the hourly rate from $20 per hour to $25 a hour means that something which formerly cost $20 will increase in price to $25. That is why a minimum-wage earner in 2026 earning a $20-an-hour minimum wage is no better off than a minimum-wage earner in 1982 who was earning $3.35 an hour.

In regard to bikes, these are things which are purchased with "disposable" income, that is, money left over after other living expenses are paid. Inflation had greatly reduced peoples' disposable incomes, and those industries which depend on that part of income will suffer. Things will not get better until the value in the system increases relative to the money supply. Japan endured such a situation in the early 70's, when inflation hit more than 20%. The problem was solved by freezing the money supply, allowing value to catch up. But his required that the state limit spending (that is, not increase it), because, as with all countries, part of state spending is paid for with newly-created money. So long as the money supply isn't increased beyond the value extant in the system, wages and savings don't lose value.

This is why inflation has remained lower in Japan relative to other countries. I frequently visit America and Europe, and am always shocked when I see the prices of things. For example, a bottle of cola at a grocery store here in Tokyo costs 107 yen, at the current exchange rage, that is around 70 cents. A bottle of cola at an American store costs about $2.49, or about 375 yen. Every week I have a meal with my daughter at a Tokyo McDonald's. The price, with tax, for my meal, is 890 yen, or around $6. The same meal at an American McDonald's is $9.99, or about 1500 yen. Japan, remembering the hyperinflation of the early 70's, avoided as much as possible printing, borrowing, and spending during the pandemic, and ended up spending about 1% what America did on pandemic relief. Japan has experienced some inflation. But this has been caused by the increased cost of dollar-priced commodities like oil, gas, steel, etc. And higher inflation in America has resulted in higher interest rates, which has pushed up the value of the dollar relative to the yen.

America's inflation problem is being caused by a weak dollar. This weak dollar has caused further weakening of other currencies. America must get its fiscal house in order. Currently, American public debt has surpassed WW2 levels, which is insanity. The problem with this spending is that it creates a negative return on value. For every dollar the state spends, you get less than a dollar's worth of education, infrastructure, healthcare, etc. One would think that record spending and record debt should result in better schools, better healthcare, better infrastructure, better law enforcement, and a better military. I doubt anyone thinks that any of these things have improved. It seems that the more money is spent on such things, the worse they get. What that means is that these programs are creating a loss in value. And so long as this loss continues, wages cannot catch up with inflation. We don't necessarily have to cut such spending, but we at least need to stop increasing it until the economy catches up.

Whenever you make a choice, or you hear a politician make a campaign promise, keep in mind the nature of unintended consequences.