Fiat inflation is a juggernaut of social, economic, cultural, and spiritual destruction.
—Guido Hülsmann, The Ethics of Money Production
All of a sudden everyone is an expert on inflation. Your brother-in-law, your local paper, and even dilettantes at dubious outlets like the Washington Post or The Atlantic feel compelled to explain our current predicament. With the admitted rate of consumer price inflation running somewhere around 8 percent, and the real rate much higher, even central bankers can’t hide the reality from us. So the commentariat has to explain to us why this is happening and make sure we blame the mysterious workings of capitalism for our troubles.
In other words, economics is back. Covid was a nice diversion, and Ukraine took up all the media’s oxygen for a few months. But now we must deal with the economic devastation caused both by lockdowns and two years of crazed fiscal and monetary policy. Everyday Americans, stubborn as they are, care more about rising gas and food prices than the political class would like. So they trot out Nancy Pelosi to explain how government spending actually reduces inflation and push pseudoeconomic ideas like modern monetary theory to explain why more federal spending is always the cure.
Thus our cover article features Dr. Robert Murphy performing a very important public service by punching holes in the inflation narrative. By the way, Bob’s series of articles on the Fed, now published as a book called Understanding Money Mechanics, is a must read for anyone interested in inflation and the incendiary schemes proposed to fight it. You can order it from our bookstore or read it free at mises.org!
As Bob explains, Keynesian demand-side true believers—led by Paul Krugman—spent 2021 insisting inflation was not happening, that it was transitory if it was happening, and that even if it’s permanent, nobody could have predicted it.
Monetarists like Scott Sumner, meanwhile, essentially support free markets except when it comes to money. They were busy predicting a “golden age” for Fed policy right up until the covid crisis, praising the Fed for having solved the business cycle (where have we heard that before?). But all of this vaunted central bank “independence” and technical expertise went out the window in March 2020, just as it did in the terrible fall of 2007. And so, when faced with the reality of a political Fed that abandons monetary “rules” at the first sign of trouble, market monetarists retreated to their comfort zone: a big drop in (nominal) GDP is by definition the Fed’s fault, unless it’s the market’s fault!
Speaking of the Fed, our David Gordon is back with a review of a book that is making a big splash in money circles. The Lords of Easy Money: How the Federal Reserve Broke the American Economy, by journalist Christopher Leonard, is a thoroughgoing critique of the subversive power of our central bank. And it’s a welcome critique by a writer from the Left who understands the untoward benefits monetary policy creates for politically connected commercial banks. In this sense Leonard inadvertently approaches both the Cantillon effect and Mises’s dictum that money is never neutral. But while his description of the Fed as a huge engine of crony privilege is spot on, his prescriptions are wrong. He argues for strengthening the fiscal institutions of Congress, the White House, and state governments, which he bizarrely imagines are “democratically controlled” unlike central banks. But all considered, Leonard has provided a needed and well- researched gateway argument for those who don’t share our political views.
You’ll also enjoy my quick interview with the great investor and storyteller Jimmy Rogers. Rogers grew up in tiny Demopolis, Alabama, and managed to make his way to Yale, Oxford, and across the world multiple times before landing in Singapore. He’s also a big fan of Austrian economics and a clear-eyed realist regarding the folly of state planning. His advice for young people is particularly apt today.
Finally, our young friend and Mises U alum Peyton Gouzian and I discuss the big questions of liberalism and illiberalism in the twentieth century in a Q&A, with an eye toward the implications for the twenty-first century. Will the West choose the liberalism of Mises—rooted in property and self-determination—or the ersatz version of Hillary Clinton, promising self-actualization and global governance? It’s a question worth asking today more than ever.
