Inflation Malarkey

Faced with public outrage over the soaring prices of gasoline, food, and other items, President Biden has announced his intention to combat inflation. At the same time, monetary experts in the mainstream press are weighing in with their recommendations on how to fight inflation.

It’s all malarky. No doubt the next thing they are going to do is come up with buttons that say “Whip Inflation Now!” just as Republican President Ford did. 

There is one — and only one — cause of inflation: the Federal Reserve System. The Fed is America’s central bank. It is in charge of the money supply. When it expands the money supply, it is inflating the money supply. 

That’s what the Fed has been doing for years and decades. It’s been inflating the money supply. Once the pandemic hit, it hit the inflate button even more times, expanding the amount of money in circulation exponentially.

That’s how we also get those economic booms and busts. Each time they inflate the balloon, it bursts with a bigger pop. The next time it bursts, the pop will be even bigger than the last time. 

There is nothing new in all this. Governments have been inflating the money supply throughout history. Inflation of the money supply has always been an easy way for governments to spend money. Ordinarily, to spend money they have to tax people. But people don’t like taxes. So governments instead just print money and spend it, in the process inflating or expanding the overall supply of money. 

What happens when the Fed inflates or expands the money supply? It cheapens the value of everyone’s money. If there is $1 trillion in circulation and the Fed expands or inflates the money supply to $2 trillion, obviously that means that everyone’s dollars are going to buy less than before. 

How is that monetary debauchery reflected? Through the prices of things that money buys. Like gasoline or food. Prices across the board start increasing, which is natural. There is no other way to reflect the reduced value of everyone’s money. 

President Biden and many other politicians clearly do not get this. Neither do many commentators in the mainstream press. They have absolutely no idea that the Federal Reserve’s expansion of the money supply is reflected in rising prices of things that people buy. They think that the rising prices are because of Russia’s invasion of Ukraine or supply-chain issues. They think that the Federal Reserve has nothing to do with the monetary debauchery.

But the Federal Reserve has everything to do with inflation and monetary debauchery. That’s why prices are rising across the board.

The reverse side of a Washington Quarter Dollar, which was 90 percent silver. Licensed under Creative Commons.

In fact, that’s why year after year, decade after decade, the value of the U.S. dollar has diminished. That’s why you use cheap-alloyed coins to buy soft drinks from a machine rather than real silver quarters. At one time people used silver quarters to buy their soft drinks. But as the value of the government’s money cheapened due to Federal Reserve expansion or inflation, it was no longer smart to use silver coins to buy soft drinks.

It all had to do with the massive, ever-growing expenditures of the federal government, specifically with respect to its welfare-state programs, its regulatory programs, and especially its warfare-state programs. Does everyone remember those “free” stimulus checks? As we here at FFF pointed out at the time, they weren’t really going to be free, as people are now finding out when they fill their cars with gas.

It shouldn’t surprise anyone why there has always been so much chaos in the monetary sphere. The Federal Reserve is based on monetary central planning, which is a variation of the socialist paradigm. Socialism always produces crises and chaos. 

There is only one solution to this monetary debauchery. That solution does not lie in reforming the Federal Reserve. It lies in terminating, abolishing, dismantling, and ending the Federal Reserve and establishing in its stead a free-market monetary system. Or as the Nobel Prize-winning economist Friedrich Hayek put it, the solution lies in “denationalizing money.” The free market produce the best of everything. It would produce the best monetary system in history and help place our nation back on the road to liberty and prosperity.

Jacob Hornberger, Future of Freedom Foundation

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