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The Crooks Running The Federal Reserve Have Been Getting High On Their Own Supply

Posted by M. C. on September 30, 2021

They knew that flooding the financial system with new money would cause the value of those investments to go up.

In other words, they made conscious decisions that they knew would make themselves even richer.

http://theeconomiccollapseblog.com/the-crooks-running-the-federal-reserve-have-been-getting-high-on-their-own-supply/

by Michael Snyder

Liquidity injections are like a drug, and the financial markets just can’t get enough of them.  But as they were endlessly juicing the stock market, officials at the Federal Reserve broke one of the cardinal rules of drug dealing.  You never get high on your own supply.  It turns out that quite a few of the big dogs over at the Fed have very large investments which greatly benefitted from all of the cash that the Federal Reserve was endlessly pumping into the marketplace.  If that sounds “extremely corrupt” to you, that is because it is extremely corrupt, and it is another example that shows why the Federal Reserve should be completely abolished.

Earlier this week, the entire nation was stunned when news of this scandal first started to break…

Federal Reserve Chairman Jerome Powell directed staff to review the central bank’s ethics rules for appropriate financial activities after disclosures that several senior central bank officials made multiple multimillion-dollar stock trades in 2020, while others held significant investments.

That sounds really bad, right?

But then more of the specific details started coming out and it got even worse…

  • Powell held between $1.25 million and $2.5 million of municipal bonds in family trusts over which he is said to have no control. They were just a small portion of his total reported assets. While the bonds were purchased before 2019, they were held while the Fed last year bought more than $5 billion in munis, including one from the state of Illinois purchased by his family trust in 2016.
  • Boston Fed President Eric Rosengren held between $151,000 and $800,000 worth of real estate investment trusts that owned mortgage-backed securities. He made as many as 37 separate trades in the four REITS while the Fed purchased almost $700 billion in MBS.
  • Richmond Fed President Thomas Barkin held $1.35 million to $3 million in individual corporate bonds purchased before 2020. They include bonds of Pepsi, Home Depot and Eli Lilly. The Fed last year opened a corporate bond-buying facility and purchased $46.5 billion of corporate bonds.

They knew that flooding the financial system with new money would cause the value of those investments to go up.

In other words, they made conscious decisions that they knew would make themselves even richer.

This is the sort of extreme corruption that we would expect to see in third world dictatorships, but it is happening right here in the United States of America.

But at least nobody got hurt, right?

Wrong.

As the Federal Reserve and other global central banks have been flooding their respective systems with unprecedented amounts of new money, food prices have been aggressively rising all over the globe…

Whether for bread, rice or tortillas, governments across the world know that rising food costs can come with a political price. The dilemma is whether they can do enough to prevent having to pay it.

Global food prices were up 33% in August from a year earlier with vegetable oil, grains and meat on the rise, data from the United Nations Food and Agriculture Organization show. And it’s not likely to get better as extreme weather, soaring freight and fertilizer costs, shipping bottlenecks and labor shortages compound the problem.

You and I may be able to handle rising food prices (at least for now), but on the other side of the globe there are scores of people that are deeply suffering at this moment…

Filipino broom maker Gloria Hernandez longs for chicken and milkfish — big milkfish. She can only afford small ones now, and they don’t add up to a decent meal. She eats rice with coffee twice a day so she doesn’t feel hungry. Fried eggs and bread — those are the foods Nigerian clergyman Femi Oyekan Moses used to eat all the time and misses the most. Now he mainly eats beans and corn and often skips lunch.

Hernandez and Moses are part of an emerging group who could once provide regular meals for themselves and their families but are now struggling because of the pandemic. They’re not on the verge of starvation as so many millions are, but they’re suffering from what’s called “food insecurity” in moderate to severe degrees, unable to afford a balanced and nutritious diet because of income loss and rising prices.

In fact, it is being reported that the number of people around the world that are facing “food insecurity” increased by 320 million in just 12 months…

According to a July report from the World Food Programme and the World Health Organization, 2.37 billion people worldwide, or one in every three people, were in that latter category in 2020. That’s an increase of 320 million people in one year.

Hundreds of millions of people do not have enough food to eat tonight because global central bankers wanted to make themselves and their wealthy friends even wealthier.

You can call that whatever you want.

I call that “evil”.

The reason we still have a Federal Reserve is because the American people kept sending politicians to Washington that support the Federal Reserve.

In recent years there have been people running for office that were calling for the Federal Reserve to be abolished, but they didn’t get the kind of support that they deserved.

Hopefully these shocking new revelations about Fed officials will start to wake more people up.

I would love see a renewed “End the Fed” movement in this country.

Because the truth is that we do not need a central bank to prop up our financial system and run our economy.  We are supposed to have a free market economy, and our financial markets are not supposed to be a rigged game.

What has been going on at the Fed should actually not surprise any of us, because it is simply a reflection of the deep corruption that we are seeing on just about every level of our society.

Without at least some basic level of morality, no society can survive for long.

Sadly, the level of morality in our society continues to sink, and it is often those that walk the halls of power that are the most corrupt of all.

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The Biggest Federal Reserve Scandal

Posted by M. C. on September 27, 2021

A limited audit authorized by the Dodd-Frank Act found that between 2007 and 2010, the Federal Reserve committed over 16 trillion dollars to foreign central banks and politically influential private companies. Imagine what a full audit would find. It is time to end the scandal of allowing a secretive central bank to have so much power over the economy and our liberty. It is time to audit, and end, the Fed.

https://mailchi.mp/ronpaulinstitute/sept11at20-115662?e=ff526b933a

Sept 27 – Following revelations that Federal Reserve officials made trades in financial assets while the Fed was taking extraordinary efforts to “stimulate” the economy, Federal Reserve Chairman Jerome Powell ordered a review of the Fed’s ethics rules. While these trades appear problematic, they pale in comparison to the biggest Fed scandal — the Fed’s impoverishment of ordinary Americans, enrichment of the elites, and facilitation of government debt and deficits.

The depression induced by coronavirus, though really caused by so-called public health actions government took in response, was the official reason for the Fed’s increased asset purchases last year. However, the Fed actually started ramping up its money creating activities in September of 2019, when it began pouring billions a day into the repo markets, which banks use to make short-term loans to each other, in order to keep repo market interest rates low.

Coronavirus was just a convenient excuse for the Fed to do more of what it was already doing. Now, the Fed is using the limited reopening as a scapegoat for rising prices. Of course, anyone who understands Austrian economics understands that rising prices are a symptom, not a cause, of inflation. Inflation is the very act of money creation by the Fed.

Rising prices that diminish the average American’s standard of living are not the only result of the Fed’s manipulation of the money supply. The manipulation distorts economic signals, producing results including booms, bubbles, and busts.

Inflation has always benefited the well-connected elites who receive the Fed’s newly created money before the new money causes widespread price increases. The true motivation behind Fed policies was revealed by former Fed official Andrew Huszar in 2013. Huszar, writing for the Wall Street Journal, confirmed that quantitative easing kept stock prices high, instead of helping Americans struggling with the aftereffects of the 2008 meltdown.

Other beneficiaries of the Fed are big-spending politicians. The Federal Reserve’s purchase of federal debt instruments keeps the federal government’s debt servicing costs manageable. This is why, despite Chairman Powell’s recent suggestion that the Fed will soon begin “tapering” its purchases of Treasuries, the Fed is unlikely to significantly reduce its purchase of Treasuries or allow interest rates to significantly increase.

Powell is also unlikely to upset President Biden and Biden’s congressional allies as long as progressives are urging Biden not to reappoint Powell. Progressives want to replace Powell with someone more committed to fighting climate change and systemic racism, two boogeymen routinely bought out as excuses for vast expansions in government spending and power.

Another major scandal involving the Fed is Congress’ refusal to pass the Audit the Fed bill and let the American people know the truth about the Fed’s operations. Audit the Fed authorizes a Government Accountability Office (GAO) audit of the Fed’s dealing with foreign governments and central banks, the Fed’s discount window operations, reserves of member banks, securities credit, interest on deposits, and open market transactions. Audit the Fed would finally reveal the truth about the Fed’s operations.

A limited audit authorized by the Dodd-Frank Act found that between 2007 and 2010, the Federal Reserve committed over 16 trillion dollars to foreign central banks and politically influential private companies. Imagine what a full audit would find. It is time to end the scandal of allowing a secretive central bank to have so much power over the economy and our liberty. It is time to audit, and end, the Fed.

—

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Too Much Inflation? Just Raise the Inflation Target! | Mises Wire

Posted by M. C. on September 24, 2021

But it’s a safe bet that if the accepted inflation target were increased to 4 percent, we’d be hearing little to nothing right now about tapering, normalization, or any other effort to cut price inflation. The Fed would then be more free to keep the easy money spigot open longer without having to hear complaints that the Fed has “lost control” of price inflation. That would be great for stock prices and real estate prices. Ordinary people, on the other hand, might fare less well. 

https://mises.org/wire/too-much-inflation-just-raise-inflation-target

Ryan McMaken

In late August, Fed chairman Jerome Powell suggested that the Federal Reserve would begin tapering before the end of the year, an admission that price inflation was rising above the 2 percent target. Nonetheless, the Fed took no immediate action in the following month. This week, Powell again suggested a taper would begin soon, stating it would begin soon enough that the process could “conclud[e] around the middle of next year,” and maybe could begin in November. This, of course, was highly conditional, with Powell noting this taper would only happen if “the economic recovery remains on track.”

Some interpreted this as a hawkish turn for Powell, but again, we should expect no immediate action on this. Lackluster economic growth remains a concern and Powell’s qualifier on the “recovery” remaining on track will be key. Last week, Goldman downgraded the US economic growth forecast, and the Beige Book—which always casts economic growth in a rosy glow—also reduced its description of the economy during July and August to “moderate.” Meanwhile, the Bank of England today signaled a worsening global situation with its own downgrade of growth expectations. In other words, if the economy isn’t improving enough—according to the Fed—then it can simply abandon plans to taper.

The Fed may be talking taper, but fears of low growth among doves will fuel ongoing calls for continued stimulus. In fact, we’re already seeing some calls for abandoning the 2 percent inflation target in favor of even higher targets. This, it is believed, will allow for longer and more aggressive periods of stimulus. 

A Weak Recovery

The root of this drive for more inflation lies partly in the fact that many inflation doves believe that the Fed was too timid with stimulus after the Great Recession. Indeed, growth was remarkably slow in those days, producing “the slowest economic expansion” in many decades.1 This was in spite immense amounts of monetary stimulus. Nonetheless, the Fed repeatedly spoke of an “improving economy,” and repeatedly hinted at tapering. But it was only in 2016 that the Fed finally dared to allow the target interest rate to inch upward. This was largely done out of fear the Fed would have no room to maneuver in case of another crisis. Price inflation, after all, remained low in the official measures.

But in 2017 and 2018, when CPI inflation began to push above 2 percent, the expectation arose that the Fed would begin to meaningfully taper to keep inflation near the stated 2 percent target. This alarmed some inflation doves who were concerned—with good reason—that any reining in of the Fed’s easy money policies would end the very fragile and lackluster recovery then underway. They wanted to keep the asset-price inflation going—to reap the benefits of the so-called “wealth effect.” These fears were partially borne out when, in spite of the timidity of the Fed’s tapering efforts after 2018, the repo crisis of 2019 suggested trouble was indeed brewing. And it’s not surprising. Economic “growth” rested largely on a mountain of zombie companies and a financialized economy addicted to artificially cheap credit. 

How that would have played out in the absence of the covid panic is unknown. In any case, efforts at reining in monetary inflation evaporated with the covid crisis and the target interest rate was quickly returned to 0.25 percent. Additional asset purchases resumed at breakneck speed, with the Fed’s portfolio soon topping $8 trillion.

Pushing Inflation Targets Upward

The covid crisis gave doves an opportunity to press for a more “flexible” inflation target. In August of 2020—with central bankers looking for new ways to justify continued stimulus—the Fed adopted a new policy in which it would pursue an average 2 percent inflation goal. In other words, the Fed could now pursue a price inflation goal above 2 percent for some periods so long as it all averaged out to 2 percent over time.

But even that hasn’t been enough for the advocates of ever more price inflation. We’re now seeing calls for ending the 2 percent target altogether—and raising it.

For example, writing at the Wall Street Journal earlier this month, Greg Ip noted that Powell appears to be banking on the inflation rate soon returning to 2 percent. But what if it doesn’t? Ip says if inflation remains above targets, the Fed should just raise the targets. He writes:

One strategy [Powell]—or his successor—should consider in that eventuality is to simply raise the target.

And why pursue higher inflation? Ip takes the popular view of the “mythical trade-off between higher employment and inflation,” as Brendan Brown describes it. For Ip, higher inflation is the way to ensure an employment-fueled expansion, and he writes:

Why would higher inflation ever be a good thing? Economic theory says modestly higher, stable inflation should mean fewer and less severe recessions, and less need for exotic tools such as central-bank bond buying, which may inflate asset bubbles. More practically, if inflation ends up closer to 3% than 2% next year, raising the target would relieve the Fed of jacking up interest rates to get inflation down, destroying jobs in the process.

According to Ip, the too-low 2 percent target places the Fed in an intolerable bind. The Fed needs more room to breathe. Rather than feel the pressure to taper just because price inflation has risen above the 2 percent target, Ip wants to make sure the Fed can just keep on with the stimulus until price inflation exceeds 3 percent, or maybe even 4 percent. And who knows? After that, maybe “economic theory” will tell us that 5 percent inflation is an even better target. Certainly, that would be no less arbitrary a number than 4 percent or 2 percent.

How Inflation Fears Put Political Limits on Easy-Money Policies

The need to raise the target rate is essentially political. Presumably, the longer inflation persists above the target rate, the more the Fed will feel pressure to bring inflation back down through some sort of tapering. After all, the adoption of a 2 percent target implies 2 percent is the “correct” inflation rate. Anything higher than that is presumably “too much.” With the Fed moving toward the 2 percent target since the 1996 —and having formally adopted it in 2012—the Fed’s credibility is on the line if the Fed simply ignores the target.

But it’s a safe bet that if the accepted inflation target were increased to 4 percent, we’d be hearing little to nothing right now about tapering, normalization, or any other effort to cut price inflation. The Fed would then be more free to keep the easy money spigot open longer without having to hear complaints that the Fed has “lost control” of price inflation. That would be great for stock prices and real estate prices. Ordinary people, on the other hand, might fare less well. 

  • 1. Brendan Brown, The Case Against 2 Per Cent Inflation: From Negative Interest Rates to a  21st Century Gold Standard, (Cham, Switzerland: Palgrave Macmillan, 2018), p. 8.

Author:

Contact Ryan McMaken

Ryan McMaken is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelinesfirst.

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Peter Schiff Breaks Down the Inflation Tax – LewRockwell

Posted by M. C. on August 13, 2021

As Peter pointed out, money creation itself is inflation. Rising prices are a symptom.

The more money there is, the more expensive everything is, because each unit of money is diminished as the quantity of money is increased. So, as you have more dollars, each dollar is worth less and now you need more of them to buy stuff.”

https://www.lewrockwell.com/2021/08/no_author/peter-schiff-breaks-down-the-inflation-tax/

Peter Schiff recently appeared on the Matt Walsh podcast. During the interview, he broke down exactly how the Federal Reserve and the US government team up to hit you with an inflation tax.

Matt said upfront that culture and social issues are more in his wheelhouse than economics. But like pretty much everybody, he sees prices rising with his own two eyes. He said he went shopping with his wife recently and “had one heart attack after another looking at how expensive everything was.” Peter said, “You ain’t seen nothing yet.”

Prices are just starting to go up. So, they’re going to go a lot higher. And I think even the acceleration is going to pick up, so, you’re going to see bigger gains.”

https://youtube.com/watch?v=zsiw_LMO-p0%3Fab_channel%3DMattWalsh

Peter said the real question is why didn’t this happen sooner? Why weren’t prices moving up faster over the last few years?

The Federal Reserve has been creating a lot of inflation. That’s been their monetary policy. That’s how they responded to the busting of the dot-com bubble, and then the housing bubble, and then COVID – they just printed a lot of money.”

As Peter pointed out, money creation itself is inflation. Rising prices are a symptom.

The more money there is, the more expensive everything is, because each unit of money is diminished as the quantity of money is increased. So, as you have more dollars, each dollar is worth less and now you need more of them to buy stuff.”

Peter said the reason we didn’t see spiking prices early on was a lot of those dollars ended up going into financial assets.

That was the way they were kind of entering into the economy and the way the Fed was administering this monetary policy. And so, you saw big increases in stock prices or real estate prices. All of those price gains were being fueled by inflation. But now, you’re finally starting to see that inflation now showing up in the consumer goods prices.”

This is particularly a problem in the wake of the COVID-19 pandemic.

What COVID did was it reduced the supply of goods, because a lot of people who used to work stopped working, and so they were no longer helping to produce goods and services that we all buy, because they weren’t working anymore. So, the economy, not only in the US but around the world, became less productive, so that we weren’t making as much stuff. The proper response for the Fed would have been to withdraw money from the economy — take money away so that the money supply was going down with the supply of goods and services, and that would have kind of kept prices in check. But instead, the Fed did the opposite. The Fed decided to print a bunch of money and mail it out to the people who were no longer working.”

In fact, a lot of people got more money not working than they earned at their job. But they weren’t producing anything.

So, we decreased the supply of goods and services to buy while simultaneously increasing the amount of money in circulation to buy them. So, it’s a perfect storm for prices. And the government is going to throw fuel on the fire with this infrastructure program and all this other economic stimulus that is really just inflation because it’s all paid for by the Fed printing money.”

Peter reminds us that every time the government spends money, it’s a tax – whether it raises taxes or not.

Whether they want to acknowledge it as a tax or not, the cost of government is what it spends, not what it collects in taxes — what it spends. So, every dollar of federal spending has to be paid for. And the way you pay for the spending that is financed when the Fed prints money to buy government debt – we pay for that with higher prices. So, what you’re experiencing every time you go and buy something, and the price is much higher than what you remember, that increase is really a tax. That is what all the government spending is costing you. It’s costing those higher prices. And since government spending is going to go way up from here, the inflation tax to pay for it is also going to go way up.”

So, what is the path out?

Well, we have to cut government spending, and then the Fed won’t be printing as much money to finance all the debt.”

But of course, there is no indication that will happen any time soon.

We’re going to keep printing money. We’re going to keep borrowing and spending money. And so, we’re going to keep paying for all that through inflation, which means the price of everything we buy is going to go up.”

In this interview, Peter also talked about the future trajectory of the economy, and he delves into Bitcoin.

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Who Is Joe Manchin? | Mises Institute

Posted by M. C. on August 11, 2021

https://mises.org/power-market/who-joe-manchin

Robert Aro

He may not be a household name, but the letter Senator Joe Manchin (D) from West Virginia wrote to the Federal Reserve chair Thursday is worthy of consideration. The notable part is where he writes:

With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy by continuing an emergency level of quantitative easing (QE) with asset purchases of $120 billion per month of Treasury securities and mortgage backed securities.

Recall that the shortest recession in US history, all of two months, ended last April, as announced by the National Bureau of Economic Research in July. Perhaps the delay in reporting the recession data, or the surprisingly short span of the recession helped prompt the senator’s frustration? He continues:

The Fed has sustained $120 billion per month in asset purchases since June 2020, despite increasing vaccination rates to combat the virus and additional fiscal stimulus from Congress in the ARP [American Rescue Plan]. The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet.

At the time of writing, the Fed’s balance sheet stood at $8.2 trillion, which is an increase of over $4 trillion since the formal start of the recession last year. He goes on to say that continual stimulus, coupled with further fiscal stimulus, will lead to “unavoidable inflation taxes” Americans cannot afford. He concludes that

it is imperative we begin to understand that long term policy responses tailored for an economic depression, like the Great Depression and Great Recession of 2008, may not be what is required for today’s economy and could result in higher than desired inflation if not removed in time.

The letter is hardly perfect. He doesn’t convey all the nuances, such as the issues with inflation, the Fed’s role in causing booms and busts, etc. And ultimately, he commends the Fed for their intervention, though he questions why it’s continuing this long. It’s understandable, as he’s a senator, not an economist, and may not even be aware of the over-a-century-long history of Austrian economics. However, he seems aware that something isn’t quite right and correctly notes that it’s the Fed’s actions which hurt a lot of Americans.

Albeit small, when someone in the Senate takes an interest in the Fed’s activities and even questions their behavior, it is a step in a better direction. If the ninety-nine other senators and more average citizens question the Fed, it could create opportunities to invoke societal change, to severely limit, and potentially erase the state entirely … one day.

As for the Fed’s response, as reported by Politico:

A Fed spokesperson said the central bank received Manchin’s letter and planned to respond.

We will continue to monitor the situation and look forward to hearing more from the Fed. Until then, let’s consider another question: Where do all the mainstream economists stand with the Fed’s intervention in the free market?

Across the USA, there are a handful of Ivy League schools and countless institutions of higher learning that all teach economics. They each have a roster of academics who get paid to continually study, teach, and write about economics. But the silence from these “intellectuals” remains deafening. It’s almost as if the mainstream academic community didn’t understand what the Fed is doing and therefore remains silent. Or maybe they do understand but don’t care to warn the public. If the latter is true, it could be due to the intellectuals’ comfort and security, which is handsomely paid for by the state. As Hans-Hermann Hoppe once said, the state offers the intellectual “a warm, secure, and permanent berth in its apparatus.”

How difficult is it for the truth, freedom, and liberty to compete with that?

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Watch “Why Do Governments Lie About Inflation?” on YouTube

Posted by M. C. on July 23, 2021

Inflation & shortages are created by Federal Reserve counterfeiting and government interventions in the economy. Every other excuse is just that, an excuse that is meant to distract you from the sources of these ills.

https://youtu.be/EGSrVV2lbXo

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Watch “Why Do Governments Lie About Inflation?” on YouTube

Posted by M. C. on July 23, 2021

Inflation & shortages are created by Federal Reserve counterfeiting and government interventions in the economy. Every other excuse is just that, an excuse that is meant to distract you from the sources of these ills.

Great summary at 17:00.

https://youtu.be/EGSrVV2lbXo

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Federal Reserve Song by Johnny Cash

Posted by M. C. on July 3, 2021

https://youtu.be/JWr9vBcN_ww

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Watch “Forcing Americans Not to Work, Paying Them Not To Work … Jobs Plan?” on YouTube

Posted by M. C. on June 28, 2021

First government recklessly “locks down” businesses, forcing thousands to close, and ruining countless economic lives. Then government passes out money that it does not have. In essence, government pays people not to work. With record job openings, employers are struggling to find people willing to work! And now government wants to spend another $1 Trillion (that it does not have) in order to create jobs! This is the upside-down world created by hyper-interventionist government and The Federal Reserve.

https://youtu.be/hfq_f5whH0A

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The Worst-Kept Secret in America: High Inflation Is Back | Mises Wire

Posted by M. C. on June 1, 2021

Tragically, the Fed has been trying for years to boost inflation to 2 percent annually. How bizarre that our central bank would deliberately strive to reduce the value of our money. At 2 percent per year, money loses half its purchasing power in thirty-five years. That would be half of your nest egg, millennials!

https://mises.org/wire/worst-kept-secret-america-high-inflation-back

Mark Hendrickson

To most people, “inflation” signifies widespread rising prices. Economists have long argued, as a matter of technical accuracy, that “inflation” denotes an increasing money supply. Frankly, though, most people don’t care what happens to the supply of money, but they care a lot about the prices they pay, so I’ll focus primarily on the numerous rapidly rising prices Americans are paying today.

Following are several examples of the current inflation.

Corn, soybeans, and wheat have been trading at multiyear highs, with corn having risen from around $3.80 per bushel in January 2020 to approximately $6.75 now. Chicken wings are at all-time record highs. It is getting more expensive to eat.

Copper prices have risen to an all-time high. Steel, too, recently traded at prices 35 percent above the previous all-time high set in 2008. Perhaps most famously, the price of lumber has nearly quadrupled since the beginning of 2020 and has nearly doubled just since January.

Naturally, with raw materials prices soaring, prices of manufactured goods are jumping, too. That is especially noticeable in the housing market, where the median price of existing homes rose to $329,100 in March—a whopping 17.2 percent increase from a year earlier.

The cost of driving is soaring, too. According to J.D. Power, cited in the Wall Street Journal, the average used car price has risen 16.7 percent and new car prices have risen 9.6 percent since January.

So, are you depressed yet? Perhaps you can take some comfort in Uncle Sam’s official price indexes where the price increases seem (at least at first glance) less jarring. But remember that the most commonly cited inflation indicator, the Consumer Price Index (CPI), is computed on the basis of a mythical “urban basket of goods” that often bears little relation to what you and I actually buy. The CPI, excluding food and energy, rose “only” 0.9 percent in March. That doesn’t sound like much, but it was the biggest one-month increase since 1981, when, for those of you too young to remember, annual inflation was 10.32 percent. As for the Producer Price Index (PPI), which generally precedes increases in consumer prices, it is increasing at the highest rate since 2010, according to the Department of Labor.

The Federal Reserve (Fed) has assured the public that the current inflation is transitory and that they have it under control. I don’t know the future any more than Fed officials do, but I do not share their confidence. I am skeptical because: first, the Fed since its inception has had a terrible track record of accomplishing any of the tasks assigned to it by Congress; second, it’s impossible for the Fed or any other entity to control millions of prices and therefore to control the rate of inflation (to believe otherwise is a central planner’s conceit).

Tragically, the Fed has been trying for years to boost inflation to 2 percent annually. How bizarre that our central bank would deliberately strive to reduce the value of our money. At 2 percent per year, money loses half its purchasing power in thirty-five years. That would be half of your nest egg, millennials!

Today’s inflation is already problematical. A higher cost of living falls hardest on the poorest Americans. Given the present uncertainty about future prices, numerous businesses are struggling to determine how much to produce, and thus are more likely to overproduce or underproduce. Furthermore, if inflation causes foreigners to lose confidence in the dollar, there could be an exodus from the dollar that could end its status as the principal global reserve currency, thereby triggering an even steeper decline in the dollar’s purchasing power.

The quantity of dollars already has risen 32.9 percent in the last seventeen months (mostly due to the federal government’s mind-boggling spending binge). It’s possible that we have passed a tipping point where prolonged inflation higher than the hoped-for and already objectionable 2 percent is unavoidable.

Hang on tight, folks. We could be in for a rough ride in the months ahead. Author:

Mark Hendrickson

Mark Hendrickson is adjunct professor of economics at Grove City College. 

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