Every month we see the same headlines, (price) inflation through the roof, and each new month makes a new 40-year inflation high. CNBC shares the not unexpected details:
The consumer price index, a key inflation barometer, jumped by 8.2% in September relative to a year earlier. Economists had expected an 8.1% annual increase.
Per the news release, Public Transportation up 27%, Health Insurance up 28%, and Food at work or school up a mouth watering 91%!” Surely, we cannot blame Russia, China, or the reopening of the economy.
Anecdotally, discussing with friends, family, or acquaintances these price increases reveal no one has anything positive to say regarding currency debasement. It makes society worse off by increasing disparity. It hurts the middle to poor class most, leading to desperation and much worse. Inflationism as a monetary policy is a scourge on society. Anyone saying otherwise either has not truly considered the issue or is highly paid to mask it.
Allow me to illustrate the latter category: This week Nobel Prize Winner Ben Bernanke is being awarded the honor for his work in the 1980’s and his role in the Great Recession of 2007-09.
The Nobel committee doesn’t provide a link to a specific paper. But a very notable one goes into great detail describing how the system works and what the future holds. The infamous: Deflation - making sure “it” doesn’t happen here, courtesy of the Bank of International Settlements.
This short paper from 2002 is a must read! It is where the newly crowned Nobel Laureate discusses:
…the danger of deflation, or falling prices.
It is here, he famously wrote about the “printing press.” The paragraph presented in its entirety:
Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.
The paper delves into intellectual absurdity, illustrating many factors wrong with the economic system in which we live. Luckily, the following year, Dr. Mark Thornton authored a paper titled Apoplithorismosphobia, or “the fear of deflation.” He introduces the paper:
Or, more correctly, the fear that an economy would “suffer” from falling prices, or a general decline in the prices of goods and services. It is a fear that has gripped some economists, journalists, and policymakers with a blinding strength as powerful as faith.
There are those who understand economics and those who are paid to not. Upon reading both essays, the truth should become self-evident. Society is not better now that the cost of food has doubled in price this past year. Nor is it sincere to treat this as a matter of the Fed simply controlling inflation by mathematical formula. This idea of “positive inflation” as a public good continues to be a widely accepted idea. Thus, we must reiterate, as we have for over a century now, that it is not.
With inflation at 8.2%, we could actually use a little deflation right about now. If there is any justice in the world, it will come when an Austrian authors a paper titled: “Inflation - Making Sure It Doesn’t Happen Ever Again,” wins a Nobel prize for their work in stopping monetary destruction once and for all.
