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

Inflation isn’t What the Experts Say. And it is deliberate

Definition of inflation 

Monetary inflation is highly desired by the state. This has been the case thought history and still is the case today. That is because inflation facilitates government spending beyond revenue it takes through taxation. Government spending gives rulers, politicians and bureaucrats greater centralised control and commanding power over people’s lives (i.e., the economy and society).

Without inflation, the state finds itself shackled within the confines of what it can take via taxes. Therefore, governments will not miss a change to gain control of the monetary system. Once the state does have control of money, inflation becomes inevitable and institutionalised. This is why, in recorded history, nearly all cases of great inflation and hyperinflationary socioeconomic collapse (e.g., Weimar Germany, Zimbabwe and more recently Venezuela) have been a result of government (and/or its central bank) deliberate policy. 

It is because of the insatiable appetite to spend more than they take through taxes that governments, through political deception and coercion, tend to undermine a sound money system and repress monetary freedom in favor of one that facilitates currency debasement (i.e., money printing). That is to say a fiat currency regime monopolised by the state and forced on the people by legal tender laws.

As such, from the statist economics standpoint, the definition of inflation had to be distorted and the public miseducated about it —so that the process of currency debasement (i.e., monetary inflation) may go unnoticed and accepted by those whom it hurts the most, the general pupation.

The popular and textbook definition of inflation is a generalized rise in the prices of goods and services. Commonly measured by the Consumer Price Index (CPI). This definition is not wrong per se but it is inaccurate and grossly misleading. Deliberately so. 

The original and more accurate definition of inflation is the artificial increase in the supply of money (and credit). By artificial it is meant that the expansion of the supply of money is not determined by the market (i.e., the people) but rather by the government, usually through a central bank. 

So, this confusion in terms is not coincidental, it is deliberate. Given the rise of Keynesian economics and the inherently inflationary 48 Comments we, humanity, live under for fifty years now.


Deliberate distortion

The original definition of inflation has been distorted for two principal reasons.  First, the government and its monetary agency—the central bank—shield themselves from any future blame for the continuing rise in prices and the currency loss of purchasing power that inevitably happens as a result of inflationist monetary policy. This enables the government and mass media outlets to divert the blame to something or someone else. The usual scapegoats being “greedy businessmen” or “corporations.”

Second, the official and distorted definition of inflation—a generalised increase in prices of goods and services—conceals the truth, the true source of inflation, thus preventing the public from knowing that inflation and the currency’s loss of purchasing power is a deliberate policy of government/central bank. Not knowing this, the public will not protest against it. 

For example, this report claims that most Americans believe “corporate greed, profiteering and price gouging” is the cause of the current inflation crisis in the United States, where price inflation hit a 40 year record high

What’s more unsettling is the same report found that the majority of those polled also believe that the government should step in and resolve the problem. In other words, the public wants the causer of the problem to solve the problem.

Such is the depth of economic misinformation and miseducation we face. Perhaps, if the public knew that since the establishment of the current US central bank in 1913, the dollar lost more than 95 percent of its purchasing power relative to gold (the commodity that gave the dollar its initial value, stability and global acceptability), they wouldn’t blame the inflation crisis on “corporate greed”. 

Economist and social philosopher Murray Rothbard wrote

“Government is inherently inflationary because it has, over the centuries, acquired control over the monetary system. Having the power to print money (including the “printing” of bank deposits) gives it the power to tap a ready source of revenue. Inflation is a form of taxation, since the government can create new money out of thin air and use it to bid away resources from private individuals, who are barred by heavy penalty from similar “counterfeiting.” Inflation therefore makes a pleasant substitute for taxation for the government officials and their favored groups, and it is a subtle substitute which the general public can easily—and can be encouraged to—overlook.” 

The government’s monetary agency and the current fiat money system are the cause for today’s increasingly inflationary and chaotic monetary situation. Not corporate greed, speculators, free-market capitalism, Vladimir Putin, or the weather. 

Under a fiat currency regime, the central bank can easily, artificially and systematically increase the money supply, almost like a magic trick, which makes inflation (mild or severe) the norm. And this inflationary process gradually destroys the purchasing power of the currency resulting in higher prices. This policy, while benefiting the government and associates, defrauds the people and impoverishes society, economically and morally. 

Economist Hans F. Sennholz noted:

It is not money, as is sometimes said, but the depreciation of money—the cruel and crafty destruction of money—that is the root of many evils. For it destroys individual thrift and self-reliance as it gradually erodes personal savings. It benefits debtors at the expense of creditors as it silently transfers wealth and income from the latter to the former. It generates the business cycles, the stop-and-go boom-and-bust movements of business that inflict incalculable harm on millions of people.

Professor Sennholz further noted:

Monetary destruction breeds not only poverty and chaos, but also government tyranny. Few policies are more calculated to destroy the existing basis of a free society than the debauching of its currency. And few tools, if any, are more important to the champion of freedom than a sound monetary system.


Conclusion

A generalised rise in the prices of goods and services, is a consequence of inflation, not inflation itself. Inflation was classically (pre-Keynesian economics) defined as an artificial increase in the supply of money and credit. 

Nowadays it makes sense to use the terms monetary inflation to specify the artificial increase of the money supply, on one hand. And use price inflation to refer to a generalised rise in prices of goods and services on the other. 

Irrespective of the confusion in definition, inflation stealthily distorts and debilitates the economy, steals the people’s purchasing power and impoverishes society while benefiting the ruling political and business elites. 

History (and common sense too) makes it clear that fiat currency regimes are unsustainable arrangements that always and inevitably fail. As such, there is no reason to believe today’s cruel and oppressive fiat currency regime will defy Natural law to stand the test of time. 

Evidence suggests it is more sensible to believe the fiat dollar standard too will crumble. And when it does, we hope economic miseducation and misinformation will crumble along with it. 

Author:

Manuel Tacanho

Manuel Tacanho is founder of Afridom, a sound money based digital banking startup for Europe and Africa. He’s also an advocate of free markets and sound money for Africa’s economic development.

What to do about Inflation

Americans live from threat to threat. Now that the “covid threat” and the “Russian threat” have played out, we have the “inflation threat,” but is it any more real?

It is true that the Central Bank has poured out unprecedented amounts of money for more than a decade. The excuses were: to cause a 2% annual inflation that would stimulate economic growth, and to save the economy from the banks financial speculations.

I didn’t think the Federal Reserve could create so much new money without driving up inflation and interest rates and driving down the dollar and equities. But the money went into the prices of financial assets–stocks and bonds–and into home prices. If you were loaded up with stocks and bonds and residential real estate, the Fed made you rich. The money also went into bank reserves as the Fed bought troubled assets from the banks and put them in the Fed’s portfolio.

So the expected inflation in consumer goods and services did not occur.

Now suddenly here is inflation with some measures knocking on double-digit doors. Judging by high stock and bond prices, this is not inflation from previous money-printing being drawn out of stocks and bonds to spend on consumer goods. Some claim that the checks sent to locked-down people to substitute for missing pay checks are at fault, but this money, at best, only replaced the money in the missing pay checks.

So what is the cause of the inflation? Or, more precisely, is it really inflation, that is, prices driven up by excessive spending, or is it a reduction of supply in relation to demand? If the latter, the solution is to increase supply, not reduce demand with higher interest rates or higher tax rates.

The better part of the rise in prices is the direct result of the foolish and counterproductive lockdowns. The lockdowns reduced supply. Much work came to a halt. Supply chains were adversely impacted. Many businesses failed and have not reopened. Real GDP declined, but money didn’t.

With the flow of goods and services reduced while money wasn’t, prices rose. Many service businesses, such as pool services, heating and air, jumped at the chance to raise prices. Supermarkets have to bid for items in short supply, and this has pushed food prices up.

Other idiotic policies of governments, such as vaccine mandates for truckers, have tied up delivery trucks in protests. The California governor banned half of the US trucking fleet from entering the state, because it doesn’t meet emission standards. This means the docks at the ports can’t be unloaded, which means the ships waiting to unload can’t unload.

The fake “Russian threat” sent up the oil prices. The extraordinarily low interest rates caused a house building boom, driving up prices of construction materials.

Equity valuation driven by money creation is not a good thing. But the Fed has been at it for so long, how does the Fed stop without unwinding values based on Fed liquidity? Washington’s abusive misuse of the dollar as reserve currency by imposing sanctions on other countries has led to Russia and China organizing their own system of international payments. This will cause the use of dollars, and therefore the demand for dollars to drop, leaving the Fed with the problem of dollar depreciation, which will add to inflation. A less valued dollar raises import prices.

To sum up, the sources of today’s rising prices are three. The Fed quantitatively eased to save the banks and went on from there to make the rich richer by driving up stock, bond, and real estate prices, and rents rose with real estate prices. Washington undermined the dollar by discouraging countries from its use with sanctions. The lockdowns shrank supply and set back the ability to produce, resulting in supply and demand sending prices up.

The solution to this problem is not higher interest rates. There is no doubt that interest rates are artificially low because of the Fed’s bond purchases, but raising interest rates will not repair the damage to supply caused by the lockdowns and caused by the financialization of the economy that the Federal Reserve has aided and abetted.

A financialized economy is one in which debt service–mortgage, car, credit card, student loans–uses up a large percentage of monthly income, leaving little discretionary income to drive economic growth. Financialization was worsened by the repeal of the Glass-Steagall Act. The repeal permitted commercial banks to be investment banks. This changed the nature of bank lending and behavior. Instead of lending for new plant and equipment, the banks finance takeovers of existing assets and engage in financial speculation.

The solution to the causes of the current inflation is to remove the policies that restrain the growth of output. There has to be a supply-side solution. In the early Reagan years the solution was a reduction in the high marginal tax rates that restricted output. Today the supply-side solution is policies that move the economy away from the absorption of income in debt service and toward supporting the expansion of output.

Biden Regime Thinks 7% Inflation is too Low

Blocked by US federal courts from imposing its illegal vaccine mandates, the criminal and insane Biden regime has resorted to imposing mandates by prohibiting unvaccinated (however that condition is currently defined) truckers from delivering goods to the US from Canada and Mexico. For a country that has offshored so much of the production it needs, reducing deliveries by stupid and ineffective “Covid policies” guarantees inflation.

The corrupt and stupid Transportation Secretary Alejandro Mayorkas justified the Biden regime’s interference with commerce as the regime’s “commitment to protecting public safety.”

This is extraordinary. With it now a proven and uncontested fact that the “vaccine,” no matter how many jabs, does not protect against Covid but does cause injury and death, the dumbshit Secretary of Transportation is protecting us by reducing the supply of goods and driving up the inflation rate!

Now we will learn the true cost of globalism. Having offshored almost everything including food production, Americans are going to experience what life is like in a third world country.

Paul Craig Roberts

Worry About Inflation, Not Immigration

High inflation can harm low-income families. Immigration, not so much.

Inflation, labor shortages, and the migrant crisis have captivated the news cycle for most of 2021 and led to wavering debates over the severity of these problems and how best to resolve them. Lately, the attention has been on whether soaring inflation will erode the real earnings of the average American. That hasn’t stopped some people from sounding off alarms on immigrants—whether at the border or on employment-based visas—for fear that increased labor competition will depress the wages of America’s existing low-skilled workers.null

How real are these concerns for the most vulnerable Americans? Should they be worried for their wallets due to increased inflation, immigration, or neither?

Inflation can act as a regressive tax if rising prices are centered on necessities and if workers in poorer bargaining positions are unable to obtain pay increases. When inflation was growing at about 2 percent per year pre-pandemic, a person making $15 an hour, or $30,000 annually, would lose about $600 a year without a pay increase—not a trivial amount for someone living paycheck to paycheck.

But 2 percent inflation growth is no longer our reality. Prices are now up 6.8 percent since last year, which is the sharpest increase in 39 years. If a $15-per-hour worker didn’t receive a pay raise over this last year, his real earnings could fall by as much as $2,040.

Some workers did see a bump in their paychecks, albeit not enough to offset inflation. After accounting for increases in nominal earnings, the Bureau of Labor Statistics has estimated that, on average, workers experienced a 1.9 percent pay cut over the last year due to inflation. This means a $15-per-hour worker likely saw $570 disappear from his wallet.null

Averages can often be misleading, though. Gas prices have climbed by 58.1 percent over the last year, and low-income Americans tend to spend more of their average dollar on gas. Indeed, a Federal Reserve Bank of New York study found that poor and rural households are particularly hard-hit when gasoline prices skyrocket, and this was a main contributor to “inflation inequality.”

Finally, we should acknowledge another factor that masks the typical impact of inflation on wages: the unique labor shortage experienced in the last year, which was partially caused by lingering unemployment benefits and has led to higher-than-usual increases in pay for many workers. Without it, low-income workers would be significantly worse off due to climbing inflation.

Notably, some inflation is not always concerning—especially if it’s steady, or temporary, or accompanied by simultaneously raising wages. But today, we can still say with confidence that low-income workers are in for a rough adjustment.

In contrast, most research shows that immigration has a small effect on wages in the short run, whether it’s a positive or negative effect.

To put this into perspective, the highest-end negative estimate (and one frequently cited by opponents of immigration) finds that the relative wages of U.S.-born workers fall by almost 4 percent when immigration increases the number of workers within the same skill group by 10 percent. However, even this high-end estimate is often misinterpreted and miscited because it measures the relative impact and not the absolute impact on wages. In other words, it measures the effect of immigration on the wages of one skill group relative to another, and not how immigration impacts the total amount of money someone actually makes.

Over the past decade, immigration has increased the number of workers with only a high school diploma by 0.14 percent per year on average. Even if we put aside the problems of using the high-end estimate, this would result in U.S.-born workers with the same education experiencing a fall in income of about 0.06 percent annually. For our $15-per-hour worker, this amounts to a yearly pay cut of only $18 due to low-skilled immigration. That’s hardly a comparison to the real impact of inflation on the same worker.

It’s not even clear that we need to be making the comparison. The United States has experienced a net outflow of immigrants without a high school diploma since 2010, meaning U.S.-born workers who dropped out of high school would actually be earning more using that same estimate. Immigration patterns have shifted in the last few decades, with more high-skilled immigrants moving in. The research consensus is that high-skilled immigration improves the wages and employment prospects of all Americans, with long-term increases in innovative activity and economic growth.

The bottom line is that immigration fears seem to be overblown when we ground them in real numbers, while high inflation can harm many low-income earners in the short term. Today, compared to immigration, Americans should be far more concerned about inflation eroding their earnings.

NEXT: Rent Control Is Fashionable Again. It’s Still a Bad Idea.

Liya Palagashvili is a senior research fellow with the Mercatus Center at George Mason University.

Christopher Kaiser is a research assistant with the Mercatus Center at George Mason University. They are coauthors of the upcoming study “How Immigration Impacts Entrepreneurship, Innovation, and American Wages and Jobs.”INFLATIONIMMIGRATIONECONOMICSWAGESMEDIA CONTACT & REPRINT REQUESTS

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If We Don’t Get Inflation Under Control, It Could Unleash Some Dramatic Consequences

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Inflation is Nothing to Laugh About

Prices charged by businesses for goods and services purchased in the U.S. rose 9.6 from a year ago in November, their highest annual pace in records going back nearly 11 years, the Labor Department said Tuesday. [Breitbart News]

Inflation is scary. But what’s even scarier is that the people in charge don’t understand what causes it; or, worse than that, they don’t care.

At the root, prices are a result of supply and demand. As demand increases for a product without increasing supply, then prices will go up. As the market provides more of that product, and demand stays the same, then prices will go down. It’s a constant fluctuation, in most cases.

High or low prices are not simply a function of whether people charging for their goods and services are “mean” or “nice.” It all boils down to supply and demand. Everyone, to one degree or another, wants to get the best price possible for their goods or services.

If you own a restaurant or a store, and people are lined up around the block every day, then you know you don’t have to lower prices; in fact, you probably need to raise them. Or get a greater supply of your product or service, if you can. Or both.

In a government-run currency, which we have, the actions of government officials and politicians are very important. Starting in 2020, the government shut down the economy. The economy shut down because the government (I would argue) massively overreacted to a flu. Regardless of what you think about that, the government did it. But at the same time the government shut down the economy, the government injected trillions of dollars into that stalled economy. This had to create pent-up demand. And it did. So now the demand cannot keep up with the supply. What do you get? Rising prices.

It’s complicated, but that’s part of the story. The other part of the story is what free market economists have said for decades. When the government puts “too much” money into the economy, because they think that by doing so they can stimulate economic growth, then you get inflation. Inflation is not defined by rising prices. Rising prices are a symptom of inflation. The definition of inflation is government giving more money to people than the market (i.e., real people) want or need. The ultimate extreme of this example was in 2020, and into 2021, when the economy had shut down yet the government injected trillions of dollars into the economy.

Given the big spending policies of Trump/Congress in 2020, and later the Democrats and Biden on a much bigger scale, inflation was inevitable — according to everything that would have been predicted by free market economics. The problem is that nobody in power subscribes to free market economics. They subscribe to monetarist and other socialist-leaning policies which say the solution to every problem is to inject more and more and more government dollars (fiat currency, it’s called) into the economy.

Give people money they don’t have and that nobody has actually created — and you get inflation. It’s spiraling out of control. Yet nobody seems to care. Biden minimizes and laughs at it. He’s demented and creepy, but he speaks for the powers that be. These powers that be do not care what happens to the vast majority of us. That’s our biggest problem: Even bigger than inflation. But make no mistake. Inflation, especially hyperinflation, will ruin us all because nothing we have will be worth anything.

Big government is not free. And inflation is the price  we’re paying.

Michael J. Hurd, Daily Dose of Reason

Whip Inflation Now

I was only a child when Gerald Ford was president, and he promised to eliminate inflation with “Whip Inflation Now” buttons. I remember the adults laughing about it. As if the problem of 1970s inflation was caused by ordinary people and a ridiculous p.r. campaign would make it all go away. Then we went from bad to worse with Jimmy Carter. It took Reagan to change everything, and make our lives better for a miraculous few decades.

You had better ask your older relatives if they can find any of those Whip Inflation Now buttons. Because in the absence of 180-degree course reversals in just about EVERYTHING WE’RE DOING, inflation is going to get worse. Probably a LOT worse, even worse than the 1970s.

Inflation is a tax. You pay it so the government can spend into oblivion to advance its power.

Read what economists say (sources below). Rising prices are not inflation; rising prices are a RESULT of inflation. Inflation occurs when a government-run money supply (which we have, via the Federal Reserve) is increased by the government at a higher rate than demanded by consumers. What happened in 2020 and 2021 was government literally spending trillions of dollars as compensation for shutting the entire economy down. It was morally obscene, politically illegal and — as it turns out — economically insane, as well.

It was not necessary to shut down the entire economy for any reason, and it never will be. That’s truly medieval madness happening in the 21st Century. Even if COVID had been as bad as projected — which it wasn’t — many things would have stayed open and no government “rescue bill” would have been necessary. But the government literally created a crisis so that it could run in, be the hero and get rid of Trump all at the same time. It’s the most brilliant scheme of evil since 9/11 — and maybe ever.

And now we’re paying. In the worst case, we may all end up ruined by it, because inflation (unchecked) will destroy the value of money. And that means your salary, your savings accounts and all of your possessions become economically worthless. Think about that. Even the great Joe Biden can’t save you from that; he’ll just snicker and sneer, while his dumb witch understudy cackles at you.

The Bidenistas excuse inflation by saying it’s merely the temporary result of the COVID shutdown. That’s only half the truth; and it’s not the real truth. In fact, it’s a lie. The real truth is that the government (first in 2020, then in 2021) spent more money than any government has ever spent in all of human history. We got inflation in the 1970s because the government spent like drunken sailors on the Great Society (LBJ) and the Vietnam War (LBJ-Nixon). That spending was nothing compared to now. Only when government retrenched on the growth of increase in spending, as well as taxation, in the early 1980s did inflation finally become relatively minimal. Until now.

Inflation has stayed with us because it’s the inevitable byproduct of a government-run currency. If the government didn’t control the currency — and if we had, say, a gold standard instead, where market forces were in charge — then it wouldn’t be possible to inflate or deflate the currency at will. A gold standard relies on human action, i.e., the law of supply and demand. The Federal Reserve relies on — well, on human whim. And, as we all know, the humans presently in charge are all idiots (at best) and tyrannical sociopaths (at worst).

Trump and the Pelosi Congress are to blame for the 2020 spending. Yes, Trump is partly to blame. Trump, to be fair, probably would have stopped with that terrible mistake, but Pelosi and the Bidenistas have taken us into the stratosphere on spending and inflation. And, unchecked by electoral concerns (thanks to election fraud), they are just getting started. The Green New Deal will ruin us financially, to say nothing of returning to the 1850s with respect to transportation and fuel.

It’s very simple: If we give people power to control the money supply, we give them the power to control our prices, our livelihoods, and our very survival. Eventually, that comes home to bite us.

If we give the LEAST morally and LEAST intellectually qualified people the power to control the money supply … well, it’s really, really scary.

And that’s where we are.

Michael J. Hurd, Daily Dose of Reason

Inflation is NOT Good for Us

In the 1970s, Jimmy Carter and the other fools running things at least acted like they believed inflation was a BAD thing. They falsely claimed they could fix it. Today they tell you inflation’s good for you, and to stop expecting so much. The arrogance of today’s tyrants may surpass Hitler, Stalin, Mussolini and so many others combined. The people running things today are just mind-blowingly rotten, with no redeeming virtues whatsoever.

Michael J. Hurd, Daily Dose of Reason

Why Inflation Now ?

Inflation is back. In a big way. And, horrifying as it is to contemplate, it could lead to hyperinflation. Hyperinflation brought down pre-Nazi Germany and Venezuela, among other places. Hyperinflation, which involves the total devaluing of the currency, means the kiss of death for an economy, and a society.

How did we suddenly get so much inflation? To understand it better, I recommend the writings of the best economists. I have read Ludwig von Mises, Henry Hazlitt and George Reisman extensively. Also, read the works of Frederic Bastiat.

With inflation, the government “prints” or creates more money than the economy needs. This is what happened after the so-called pandemic of 2020, although it has continued into 2021 and, if Democrat Communists realize their dreams, indefinitely into the future. Through redistribution of wealth, and programs such as open-ended unemployment benefits at higher rates than the market pays for jobs, forgiveness of student loans, and all the rest, the government has poured funny money — thanks to the Federal Reserve’s virtually unlimited power — into the hands of consumers. Any economist will tell you this has the effect of artificially creating demand. “Artificially” means there is, thanks to this money poured into the citizenry for “free”, more demand for goods and services than there otherwise would have been in a pandemic and its aftermath, or any other context where there’s an economic downturn.

I saw a statistic yesterday that inflation in the United States is going up at 5 percent a year already, and climbing, while in other industrialized countries like Japan it’s way down at under 1 percent, or maybe 1 or 2 percent. There’s a reason: The United States, initially under Trump and the Republican Senate in 2020, and massively under Biden and the Democratic Congress in 2021, has spent like there’s no tomorrow. The debt and the deficits are piling up to incomprehensible levels, levels beyond what even ten years ago most would have considered acceptable for fighting a war to save the country from destruction. It’s clear that neither party intends to stop the spending. So we can expect more and more inflation.

Put simply: When the government creates more money than would otherwise have existed in a free market based on, say, a gold standard rather than a politicized Federal Reserve, then there’s more demand for goods and services than would otherwise have been the case. When the government hands out trillions in “free money”, it drives up demand relative to supply, which in turn raises prices. This explains the supply chain, lumber, housing, food and employment shortages, in part. These things are only going to get worse as the government continues to spend, and spend, and spend, and pour trillions of “free” dollars into the market. It’s like creating a fantasy economy; it’s the socioeconomic equivalent of heroin addiction.

Sure, the government could step in and impose price controls, as the government did back in the 1970s. Price controls lead to shortages. Why? Because the high demand remains, and the supply gets bought up by the artificially cheaper prices created by price controls. Without being able to raise prices, there’s no incentive for businesses to hustle and try to keep up with all the demand. That’s when you get, quite literally, a Soviet Russia, a Venezuela or a North Korea, where people eat their pets because the grocery store shelves are chronically empty, or a bottle of milk costs $75,000.

Read economics. Most Americans are clueless on the subject. They listen to people like Paul Krugman at the New York Times WHO IS ABSOLUTELY ALWAYS WRONG ABOUT EVERYTHING, yet they still trust him because … well, because he works for the New York Times and has an economics degree. How could he be wrong?

It’s all part of the ignorance that our media and government masters exploit so well. Ignorance and evasion are impoverishing us and, on our current road, are going to kill literally millions of us.

Michael J. Hurd, Daily Dose of Reason

Big Government and Big Inflation

April’s 4.2 percent past year increase in the Consumer Price Index is not likely to dissuade the Federal Reserve from continuing its policy of near-zero interest rates. Fed Chairman Jerome Powell believes the rising prices are just a temporary phenomenon caused by the ending of lockdowns releasing pent-up consumer demand.

Powell may be right that the ending of lockdowns would inevitably be accompanied by a rise in prices. However, this is just the latest reason the Fed has given for putting off increasing interest rates. Powell does not want to admit that the real reason the Fed will continue to keep rates low is that increasing rates will cause the federal government’s interest payments to rise to unsustainable levels.

One way the Fed increases the money supply — and thus lowers interest rates — is by purchasing US Treasury securities. These purchases increase demand for US government debt, keeping government’s borrowing costs low. An expansionary monetary policy thus enables increased federal spending and deficits. Since the lockdowns, the Fed has worked overtime to monetize federal debt, doubling its holdings of Treasury securities.https://googleads.g.doubleclick.net/pagead/ads?client=ca-pub-9106533008329745&output=html&h=280&adk=879074345&adf=3530780641&pi=t.aa~a.372876087~i.12~rp.4&w=649&fwrn=4&fwrnh=100&lmt=1621346711&num_ads=1&rafmt=1&armr=3&sem=mc&pwprc=8684081392&psa=1&ad_type=text_image&format=649×280&url=https%3A%2F%2Fwww.lewrockwell.com%2F2021%2F05%2Fron-paul%2Fbig-government-and-big-inflation%2F&flash=0&fwr=0&pra=3&rh=163&rw=649&rpe=1&resp_fmts=3&wgl=1&fa=27&adsid=ChAI8MuNhQYQ0YnV-fjOuMkNEkwAvRzVSkrGd6X0eGVC8bTZJUGBcxfSpOk6U16NjDVdrBKA46iBmcFX8OVbYO59027gCmTBqDjWrzfnG0guj4AubsaRAzCBKCcmUj4r&uach=WyJBbmRyb2lkIiwiMTEiLCIiLCJTTS1UNzIwIiwiOTAuMC40NDMwLjIxMCIsW11d&dt=1621349967275&bpp=14&bdt=6480&idt=-M&shv=r20210511&cbv=%2Fr20190131&ptt=9&saldr=aa&abxe=1&cookie=ID%3D7e035107d994f3bb%3AT%3D1619189990%3AS%3DALNI_MYyu5F4Vm53BYKijby3yI8OwOAC-w&prev_fmts=0x0&nras=2&correlator=7373187450034&frm=20&pv=1&ga_vid=1905934101.1599339146&ga_sid=1621349964&ga_hid=931902315&ga_fc=0&u_tz=-240&u_his=1&u_java=0&u_h=1138&u_w=712&u_ah=1138&u_aw=712&u_cd=24&u_nplug=0&u_nmime=0&adx=16&ady=1016&biw=712&bih=970&scr_x=0&scr_y=0&eid=42530671%2C31060005&oid=3&pvsid=2588426869731136&pem=653&eae=0&fc=1408&brdim=0%2C0%2C0%2C0%2C712%2C0%2C712%2C970%2C712%2C970&vis=1&rsz=%7C%7Cs%7C&abl=NS&fu=128&bc=31&jar=2021-05-18-14&ifi=13&uci=a!d&btvi=1&fsb=1&xpc=opJFF5PPsy&p=https%3A//www.lewrockwell.com&dtd=57

A Truth in Accounting report from April concluded the real federal debt is 123 trillion dollars — over four times larger than the 28 trillion dollars “official” debt. The higher debt calculation includes the federal government’s unfunded liabilities. The biggest unfunded liabilities are the 55 trillion dollars in promised but unfunded Medicare benefits and the 41 trillion dollars in promised but unfunded Social Security benefits.

Congress could transition away from entitlement and welfare programs without harming current or soon-to-be beneficiaries by cutting spending on militarism and corporate welfare. Part of the savings from these cuts could be used to pay down the debt, and part could be used to provide payments for current and soon-to-be beneficiaries of government programs while we transition to a free market.

Unfortunately, there is not much appetite in Congress for spending cuts. The main Democratic criticisms of President Biden’s 1.52 trillion dollars budget, which increases spending by 8.4 percent, are that Biden is not proposing bigger increases in spending and debt, or in taxes on “the rich.” Biden’s budget increases are in addition to the trillions in other spending Biden is pursuing, including related to Covid, infrastructure, and his “American Families Plan.”

Republicans are making obligatory attacks on Biden’s spending, while also attacking Biden for increasing military spending to “only” 753 billion dollars. Republican complaints about Biden’s big spending ring hollow given their support for Presidents Donald Trump and George W. Bush’s spending increases and Republicans’ proposals to spend billions on infrastructure.

Some conservatives have even embraced the madness of Modern Monetary Theory. These conservatives are urging people to stop worrying about spending and debt and instead figure out how to use Fed-financed government spending to advance conservative ends.

The refusal of Congress to cut spending means the Fed will keep increasing its balance sheet in an effort to monetize skyrocketing debt. Eventually, the increasing debt and inflation will lead to a major economic meltdown. The meltdown will likely include a rejection of the dollar’s world reserve currency status.

The only way to avoid the crash is to spread the truth among enough people to force Congress to reverse course. Early steps in reversing course are blocking Biden’s big spending plans and passing Audit the Fed so the American people can finally know the truth about the Federal Reserve’s actions.

Ron Paul