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Posts Tagged ‘inflation’

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Central Banks Do Not Prevent Financial Crises or Control Inflation

Posted by M. C. on August 21, 2025

Central banks have become the dominating force in financial markets.

Modern central banking has shown that no single authority should set interest rates and liquidity.

As such, central banks are not a limit to risk-taking, rising government spending and budget irresponsibility, but rather a tool that enables market and government excess.

https://mises.org/mises-wire/central-banks-do-not-prevent-financial-crises-or-control-inflation?utm_source=MI+Subscriptions&utm_campaign=42d171aa16-EMAIL_CAMPAIGN_2024_03_01_07_02_COPY_01&utm_medium=email&utm_term=0_-fb69bb184c-592102341

08/16/2025 • Mises Wire •Daniel Lacalle

Easing and tightening decisions move all assets from bonds to private equity. Their role is supposed to be to control inflation, provide price stability, and ensure normal market functions. However, there is little evidence of any success in achieving their goals. The era of central bank dominance has been characterised by boom-and-bust cycles, financial crises, policy incentives to increase government spending and debt, and persistent inflation. Recently developed economies’ central banks have taken an increasingly interventionist role.

The creation and proliferation of central banks over the past century promised greater financial stability. Nevertheless, as history and current events continually show, central banks have not prevented financial crises. The frequency and severity of these crises have fluctuated but have not declined since central banks became the leading figure in financial market regulation and monetary interventions. Instead, central banking has introduced new fragilities and changed the nature, but not the recurrence, of financial turmoil.

Empirical evidence dispels the myth that central banks ended the era of frequent financial crises. Regardless of central bank oversight, a credit boom preceded one in three banking crises. Who created those credit booms? Central banks, through the manipulation of interest rates. According to Laeven and Valencia’s comprehensive database, there were 147 banking crises between 1970 and 2011 alone, in an era of near-universal central bank dominance. Financial crises remain a persistent global phenomenon, occurring in cycles that coincide with episodes of credit expansion. Central banks have often prolonged boom periods with low rates and elevated asset purchases and created abrupt bust moments after making mistakes about inflation and credit risks.

According to Reinhart and Rogoff’s work, the rate of crises has not dramatically changed with central banking. Instead, the forms of crises evolved. Twin crises (banking and currency) remain common, and the severity, measured in output loss or fiscal costs, has often increased, especially as financial institutions and governments grew intertwined with monetary authorities.

The Great Financial Crisis of 2008, the Eurozone sovereign debt crisis, and the 2021–2022 inflationary burst rank among the events with the highest costs in history, contradicting the view that central banks have neutralised the risk or costliness of crises.

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Inflation: Your Role as a Milk Cow

Posted by M. C. on November 26, 2024

The purpose of bank-created inflation is to extract wealth from the populace.

By regularly increasing the amount of currency in circulation, banks create an environment in which the concept of debt appears to be beneficial. As a result, virtually everyone in today’s society not only has debt; he actually believes that he couldn’t improve his life except through debt.

Inflation: Your Role as a Milk Cow

by Jeff Thomas

Traditionally, inflation has been defined as “an increase in the amount of currency in circulation.” Such an increase almost always causes an increase in the cost of goods and services, since, more plentiful currency units lowers their rarity, as compared to the supply of goods and services, which remains roughly the same. Therefore, it shouldn’t be surprising if a 20% increase in the amount of currency units translates into a 20% increase in the price of goods and services.

Unfortunately, in recent decades, even dictionaries have been offering a revised definition of inflation, as “an increase in the price of goods and services.” This is a pity, as it makes an already confusing subject even more difficult to understand.

This is especially true for the average guy who has a minimal understanding of economics, but does realise that, even if his wages increase (which he regards as a good thing), he never seems to get ahead. In the end, he always seems to be worse off.

Let’s say that you’re paid $4000 per month. You budget for housing, food, clothing, transportation, etc. Let’s say that that adds up to $3800 per month, and you’re hoping to put $200 per month into savings. Often that doesn’t happen, as unplanned expenses “pop up,” and must be paid for. So, in the end, you save little or nothing.

In the meantime, you’re daydreaming about buying a new car, but it can’t be bought, because you don’t have any money to allocate to it.

Then, your boss says that the recent prosperity has resulted in a big new contract for the company that allows him to give you a raise of $200 a month.

This is your big chance. You go to the car dealership, buy the car, and arrange for time payments of $200 per month to pay for it.

However, what’s rarely understood is that the theoretical “prosperity” is the result of governmentally induced inflation. What appears to be prosperity is merely a rise in costs and, along with it, a rise in your wages.

You appear to be “getting ahead,” but here’s what really happens…

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As Americans Are Pummeled By Inflation — The Fed Decides On MORE Inflation!

Posted by M. C. on September 23, 2024

The Ron Paul Liberty Report

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Trump Says ‘We Are Losing Our Country’ — Is He Right?

Posted by M. C. on September 18, 2024

Yes

Roman Empire: Lost due to invasion, out of control expenditure and inflation.

The Ron Paul Liberty Report

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Why Kamala Harris Will Not Bring Prices Down… Her Plan Needs Inflation

Posted by M. C. on September 3, 2024

Inflation is the way in which the government tricks citizens into believing that administrations can provide for anything. It disguises the accumulated debt, quietly transfers wealth from the private sector to the government and condemns citizens to being dependent hostages of government subsidies.

Tyler Durden's Photo

by Tyler Durden

Authored by Daniel Lacalle,

https://www.zerohedge.com/political/why-kamala-harris-will-not-bring-prices-down-her-plan-needs-inflation

In a recent interview with CNN, Kamala Harris said that Bidenomics is working and that she is “proud of bringing inflation down.”

However, the Bureau of Labor Statistics published the latest CPI at 2.9%, despite annual inflation being 1.4% when she took office. Inflation is a disguised tax and accumulated inflation since January 2021, when the Biden-Harris administration started, has increased more than 20%.

Of course, Democrats blame inflation on the war, the pandemic, and the science-fantasy concept of “supply chain disruptions.” No one believed it, because most commodities have declined and supply tensions disappeared back to normality, but prices continued to rise.

As a result, Harris invented the concept of greedy grocery stores and evil corporations to blame for inflation and justify price controls. Is it not ironic? She blames grocery stores and corporations for inflation, but when price inflation drops, she proudly takes credit.

The reality is that the Kamala Harris plan, like all interventionist governments, creates and strives for inflation. Inflation is a hidden tax. Governments love it and perpetuate it by printing money through deficit spending and imposing regulations that harm trade, competition, and technological creative destruction. Big government is big inflation.

Inflation is the way in which the government tricks citizens into believing that administrations can provide for anything. It disguises the accumulated debt, quietly transfers wealth from the private sector to the government and condemns citizens to being dependent hostages of government subsidies. It is the only way in which they can continue to spend a constantly depreciated currency and present themselves as the solution. Furthermore, it is the perfect excuse to blame businesses and anyone else who sells in the currency that the government creates.

Kamala Harris will do nothing to cut inflation because she wants inflation to disguise the monster deficit and debt accumulation. In the latest figures, the deficit has soared to $1.5 trillion in the first ten months of the fiscal year. Public debt has soared to $35 trillion, and in the administration’s own forecasts, they will add a $16.3 trillion deficit from 2025 to 2034. It is worse. The previously mentioned figure does not include the $2 trillion in additional debt coming from Kamala’s economic plan.

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On Wealth Inequality, the Left Has a Point

Posted by M. C. on June 17, 2024

by Thomas Eddlem

Of course, the demagogic, corporate-owned left will tell us that the solution to the oppression of the poor working man is to oppress the rich man as well. “Tax the rich” is the slogan of the corporate-owned left. It’s like observing that the abusive boyfriend of a woman living on the right side of the street gives his girlfriend a black eye every week from abuse, and the single mom on the left side of the street is free from that abuse, and concluding that the only “fair” solution is to get that abusive boyfriend to blacken the eye of the woman across the street every week as well.

“…when they get the money they can and will loan it directly to the stock gamblers, to be used to exploit the people.”

The author doesn’t state the mechanism of inflation clearly enough. Printing of “fiat” (not backed by a valuable commodity such as gold) money by the federal reserve.

https://libertarianinstitute.org/articles/on-wealth-inequality-the-left-has-a-point/

depositphotos 49911113 s

The federal government has been waging a war against the middle class and working poor since at least 1970. Wealth inequality has steadily increased since the early 1970s, and it’s not a coincidence. It’s a result of a series of policies. The government wants the masses of American working people broke, propertyless, and dependent upon elected officials for the crumbs they give back as handouts from taxes taken.

The most insidious attack on working people has been inflation, which really took off when the federal government decoupled the dollar from gold in 1971.

The inflation tax is the most regressive tax that currently exists in federal policy.

Inflation always taxes wages twice, once when the labor is performed and the worker is awaiting payment, and again when the wages are deposited into the worker’s checking account. But inflation leaves the rich man’s yacht untaxed.

No level of inflation, no matter how high, can ever take one cent of value away from a yacht. A yacht is always going to be a yacht, no matter what the value of money is.

Inflation taxes the poor man’s rent he advances to his landlord, but leaves private jets and vacation homes untaxed.

Want to know where this inflation tax goes? The stolen value of the inflation tax doesn’t just vanish out of thin air.

Some of it goes to the government; economists even have a name for the benefit government draws from the inflation tax. It’s called “seigniorage.”

Rich people generally don’t pay the inflation tax, and many of them benefit from it. Let’s say you’re a billionaire real estate mogul, not unlike Donald Trump, with a net-worth of $1 billion. You buy houses and real estate, and when you get your 20% equity, you pull that equity out and invest it into another real estate holding. So you have properties worth $5 billion, net assets of $1 billion, and (with only 20% equity in your properties) you also have $4 billion in mortgage debt.

4% inflation lowers the value of the mortgage debt you owe, since with CPI inflation you’re just going to raise the rent 4% next year. Inflation created by the Federal Reserve Bank becomes a gift of $160 million annually to your net worth ($4 billion x 0.04).

Every year.

And it enriches them more if inflation exceeds 4%, as it has in recent years.

If the CPI is 10% (as it nearly was in 2022), inflation alone adds 40% ($400 million) to this real estate mogul’s net worth. That doesn’t count the decrease in the nominal debt paid off by the real estate mogul’s tenants.

And this assumes the value of his property holdings is only increasing at the rate of CPI inflation, which it’s vastly exceeding, thanks to Federal Reserve Bank interest rate manipulation and federal housing subsidies and incentives.

Inflation enriches the real estate mogul with a boatload of mortgages that are now easier to pay off. It also benefits the hedge fund speculator and the banker, who are in the very businesses of being in debt.

In other words, the inflation tax makes the value of money flow directly from the wallets of wage-earners to the vaults of rich people who work with debt.

As long as the working man holds money in his possession, whether in the form of credit to his employer for his labor, in his pocket, or in his checking account, inflation taxes him. Only when the money is finally no longer due to him does the inflation tax end.

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Doug Casey on the Relentless Rise of Taxes, Regulations, and Inflation

Posted by M. C. on May 21, 2024

Like all living creatures, the prime directive of the State is to survive and grow. But the State is unique. The State, as Mao said, comes out of the barrel of a gun. Since it’s based on coercion, it’s only natural that some form of socialism would be its preferred way to organize society. Currency inflation, income taxes, and debt have enabled governments to get completely out of control. The prognosis is not good.

The WEF wasn’t kidding when they promoted the concept that “You’ll own nothing, and be happy”. Well, at least the elite will be happy.

by Doug Casey

Doug Casey on the Relentless Rise of Taxes, Regulations, and Inflation

International Man: Almost every government worldwide is moving to increase taxes and regulations on its citizens while at the same time engaging in ever-increasing currency debasement.

What do you think of this trend, and where is it going?

Doug Casey: Higher taxes, more money printing, and more regulations are long-standing trends. The cat first got out of the bag with the French Revolution and the triumph of the Jacobins, who wanted to collectivize French society. They almost succeeded. Not many years later, Karl Marx wrote The Communist Manifesto and Das Capital, letting another feral meme loose into society. The idea that the State was a good thing and should grow is now everywhere.

With the turn of the 20th century, roughly 120 years ago, governments all over the world created central banks and the income tax. They started small but have become behemoths, funding welfare and warfare. Both things are highly destructive. In the 19th century there was no welfare and very few wars, because wars are expensive. Governments were hard-pressed to extract adequate revenue from their populations for fighting.

Like all living creatures, the prime directive of the State is to survive and grow. But the State is unique. The State, as Mao said, comes out of the barrel of a gun. Since it’s based on coercion, it’s only natural that some form of socialism would be its preferred way to organize society. Currency inflation, income taxes, and debt have enabled governments to get completely out of control. The prognosis is not good.

International Man: There seems to be a coordinated effort to increase capital gains taxes.

For example, Canada just announced an increase in the capital gains tax from 50% to 67%. President Biden has proposed increasing the US capital gains tax to 44.6% and adding a tax on unrealized capital gains.

What is going on here?

Doug Casey: The “powers that be” actually want to destroy the middle class. That’s not something they’d say, but it’s apparent that the elite would prefer a society with a small number of themselves supported by a sufficient number of plebs but without a troublesome middle class. They don’t like having to rub shoulders with masses of hoi polloi when they visit St Mark’s Square in Venice or Macchu Pichu in Peru. They want just enough service personnel around to make it an enjoyable experience. They see the middle llass as an enemy and a risk. They agree with Lenin, who said the middle class should be ground between the millstones of taxes and inflation.

These two tax increases you mentioned are harbingers of more to come. That’s guaranteed by the bankruptcy of governments everywhere; they want and need more revenue to maintain the status quo.

Meanwhile, institutions—foundations, pensions, NGOs, and the like—operate tax-free; most taxes don’t directly affect them. That suits the elite just fine because the elite control the institutions, and the institutions increasingly hold most of the middle class’s assets. The middle class and the plebs don’t really own the assets that they have in institutions, except in theory. They’re held at a distance from their money, which is just ephemeral digits on a computer. They certainly don’t control corporate voting to install directors, who in turn hire management. The way things are developing, more and more powerful institutions are controlled by BlackRock types. The elite love to talk democracy, but it’s just a smokescreen.

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Peter Schiff: Price Controls Are Coming

Posted by M. C. on March 12, 2024

“Housing isn’t driving anything. Housing’s just gone along for the ride. The driver is Maxine Waters and her buddies in Congress. They’re driving the inflation bus, not housing. Housing’s just riding in the bus along with everything else. The driver of inflation is deficit spending and the money that the Federal Reserve prints to monetize that debt.”

With price controls look for shortages that will make covid shortages look mild.

SchiffGold.com

Price Controls Are Coming

This week, Peter reacts to politicians’ sophomoric views on inflation and explains the recent surge in the price of gold. He also comments on the first day of Jerome Powell’s congressional testimony. Be sure to watch Peter’s special extra episode from earlier this week if you missed it. 

Peter thinks the price of gold has finally broken free from resistance, and it’s going to keep rising. Because retail investors have been dumping gold recently, a retail sell-off is unlikely to bring gold below where it is now:

“This rally is the first rally to new highs where the public is not participating. In fact, for weeks—actually months— leading up to the new high, the public was getting out of gold. … I think that’s a great contrarian indicator, and I think that’s a sign that this rally has legs, because normally the market peaks when you get a rush of buyers that come in. And now the market gets overbought, it gets saturated, and then there’s a correction.”

Even more promising for gold is the fact the central banks are increasing their purchases of the yellow metal, and they aren’t planning on selling it anytime soon:

“The central banks are the buyers, and they’ve got huge war chests of foreign currency reserves, plus they can print their own money and use that to buy gold. And I don’t think the central banks are that price sensitive. … They don’t want to run the price up, they want to buy it, but their goal is to have more gold, and their goal is not to sell any of this gold.”

If the retail sector stops selling and central banks keep buying gold, they’ll inevitably bid its price up even higher than it is today:

“The market is under supplied, and it’s about to run into a huge increase in demand. And what does that tell you? That means that the price of gold has a long way to go to catch up to clear that market. Gold is very undervalued right now, and it has been for some time, and that is the opportunity to buy it before it’s repriced to a realistic valuation.”

Pivoting to recent political news, Peter takes aim at Congresswoman Maxine Waters, who spuriously claims that housing prices cause inflation. Peter corrects her:

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Don’t Spare the Billions

Posted by M. C. on February 26, 2024

Joe Biden has created a tsunami of inflation with his giveaways to black voters, his open-ended support of Israel’s far right government and now billions more spending.  It’s been a financial disaster.  Donald Trump understands. After all, it was he who ended the stupid, pointless war in Afghanistan.

By Eric S. Margolis

Don’t Spare the Billions

When I was a boy growing up in New York City I was taught – and re-taught – to always save half of my weekly allowance and never spend more than I had in savings.

Too bad Joe Biden was not taught this useful Presbyterian virtue.  Recently, Biden’s government has sought $106 billion in the latest aid for arms for Israel and Ukraine, the biggest expenditure since the Vietnam War.  This while the bills for the incredibly foolish war in Afghanistan keep coming in, to date $2 trillion.

Now, the US in high-fever pre-election time, is lavishing billions upon Israel.  Most of the world is trying to get Israel out of its lethal rampage in Gaza, but the US and its failing colonial partner, Great Britain, continue to wave the banner of empire. Britain, as hardly anyone has noticed, has been bombing Yemen for the past 14 years, supplying warplanes, bombs and mercenary pilots and technicians.

President Biden is growing desperate as the election draws closer.  Polls show him way behind Donald Trump.  Both Trump and Biden are too old for the job of president.  In my old-fashioned view, only military veterans should be allowed to run for high office.

Meanwhile, Biden is splashing around tens of millions on schemes for blacks, who have become his electoral mainstay.  Jewish voters who ardently back Israel are said to provide a large proportion of the Democratic party’s finances. They are advocating deeper US involvement in the Gaza Conflict and even more money for Israel, already the largest recipient of US cash.

Pandering to Israel is standard pre-election behavior. In the old days elections were always marked by huge cash grants and the latest US weapons lavished on Israel.  And money on the ‘three I’s,’ Israel, Italy and Ireland.

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Biden, Media Gaslight People about Inflation

Posted by M. C. on December 12, 2023

by Ron Paul | Dec 11, 2023

Sadly, the increase in nominal wages gained by the recent series of strikes is unlikely to keep up with the declining real wages resulting from the Federal Reserve’s assault on the dollar’s value. This is why, contrary to the claims of many progressives, working people are the victims, not the beneficiaries, of price inflation.

https://ronpaulinstitute.org/biden-media-gaslight-people-about-inflation/

President Biden recently repeated the claim that high prices are caused by greedy businesses. Biden is not alone in trying to gaslight the people into thinking price inflation is rooted in the actions of private individuals and not the fiat money system Americans have lived under since 1971. In the media we see excessive consumer spending on luxury items, for example, being blamed for continued price inflation. The fact is that increased consumer demand can only cause prices to rise in those sectors of the economy subject to the increased demand. Prices increasing across the economy are always the result of the Federal Reserve’s conduct of monetary policy.

Trying to minimize the harm of inflation, some people in government and media will insist that, while many prices for goods are higher than they were pre-lockdown, they are still lower than were prices in the 1990s when you consider that the quality of these goods has increased. The argument is that buyers are getting higher value today than 30 years ago. Of course, any increased quality is because of market-driven innovation. If America had a free-market monetary system, instead of central bank-controlled fiat currency, prices would drop as quality increases.

It is also important not to ignore the fact that the Federal Reserve’s devaluation of the dollar’s purchasing power creates an incentive for individuals to spend money as soon as they receive it and a disincentive for them to save. This is because the dollar will have less value a year from now than today. Therefore, high levels of spending are a rational response to an irrational fiat money system.

High prices and supply shortages were inevitable after the lockdowns. However, prices would have adjusted back more if the Federal Reserve had not pushed interest rates to zero. While the Fed has raised interest rates, it has not raised rates to anywhere near where they would likely be in a free market. In fact, rates are not at historically high levels, yet many worry the Fed’s rate increases are pushing the economy toward a recession. This shows how addicted Americans are to the Fed’s “easy money,”

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