MCViewPoint

Opinion from a Libertarian ViewPoint

Fed Paper Admits Central Bank Can’t Control Inflation; Finger-Points At Federal Government

Posted by M. C. on September 1, 2022

Tyler Durden's Photo

BY TYLER DURDEN

THURSDAY, SEP 01, 2022 – 07:20 AM

Authored by Michael Maharrey via SchiffGold.com,

First, the authors acknowledge that the federal government uses inflation as a tool to handle its debt. In other words, it acknowledges that we’re all paying an inflation tax.

Second, the paper concedes that merely tinkering with interest rates won’t slay inflation if the government continues to spend far beyond its means.

https://www.zerohedge.com/markets/fed-paper-admits-central-bank-cant-control-inflation-finger-points-federal-government

It appears somebody at the Federal Reserve has figured out that the central bank can’t tame inflation, so it’s setting up a scapegoat – Uncle Sam…

A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and John Hopkins University economist Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can’t control inflation.

The paper’s abstract asserts, “This increase in inflation could not have been averted by simply tightening monetary policy.”

In a nutshell, Melosi and Bianchi argue that the Fed can’t control inflation alone.

US government fiscal policy contributes to inflationary pressure and makes it impossible for the Fed to do its job.

Trend inflation is fully controlled by the monetary authority only when public debt can be successfully stabilized by credible future fiscal plans. When the fiscal authority is not perceived as fully responsible for covering the existing fiscal imbalances, the private sector expects that inflation will rise to ensure sustainability of national debt. As a result, a large fiscal imbalance combined with a weakening fiscal credibility may lead trend inflation to drift away from the long-run target chosen by the monetary authority.”

There are a couple of startling admissions in this single paragraph.

First, the authors acknowledge that the federal government uses inflation as a tool to handle its debt. In other words, it acknowledges that we’re all paying an inflation tax.

Peter Schiff talked about this inflation tax in an interview on Rob Schmitt Tonight.

Inflation is a tax. It’s the way government finances deficit spending. Government spends money. It doesn’t collect enough taxes, so it has to run deficits. The Federal Reserve monetizes those defiticts – prints money. They call it quantitative easing, but that’s inflation. Government is getting bigger and bigger, and families across America are going to have to bear that burden through higher prices.”

Second, the paper concedes that merely tinkering with interest rates won’t slay inflation if the government continues to spend far beyond its means.

See the rest here

Be seeing you

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: