Always And Everywhere
Buckle up! The Federal Reserve’s May inflation forecast points to fireworks on Wall Street.
Nobel Prize Winning economist Milton Friedman famously taught us that “Inflation is always and everywhere a monetary phenomenon.”. However true that may have been in the twentieth century, twenty first century economics has rewritten financial physics. It has now been revealed that inflation is caused by the enemies of the western globalist elite. At minimum, it’s anyone other than the folks who print the money.
This piece of political propaganda posing as journalism is typical.
There is a repeating pattern. The Fed runs loose money. Stock prices go up. Media call it “growth”. Then, over the following few years, consumer prices start to go up. Media call it “inflation”. Then the Fed is comes to the rescue as fire fighter extraordinaire.
I can’t be the only one to have noticed. The Fed was the arsonist.
Can you find the slightest hint of that in this piece? If I didn’t know any better, following the media, I’d say it was Trump that caused the inflation, first with tariffs then with war. Just like it was Putin that caused the inflation four years earlier. This isn’t to defend Trump per se; if he had his way with interest rates we would certainly be getting more inflation. But there is no excuse for playing Fed apologist and pretending to be news. Disingenuous media like this, by covering up the true cause of inflation, are its enablers. In playing this role, they are more responsible than anyone for inflation.
Friedman’s famous statement is a definition. He defines “inflation” as prices going up because the money supply expanded too fast. It’s a pretty good definition, extraordinarily useful to those of us watching economics and finance. I use it frequently and endorse its narrow meaning.
Of course, other things can cause prices to rise as well. While we can’t call those things “inflation” under our favorite definition, when they happen they’re still real and important. Several entirely different things thing can all be true at the same time. For example, a town might experience both an earthquake and a hailstorm the same day.
Your observations about the Fed’s loose money policies ever since Bernanke are obviously true. That’s one thing that’s happening now. But it’s hard to deny that dramatically higher tariff taxes and shutting off the Strait of Hormuz are also causing substantial economic effects. You and I don’t call it “inflation”, but it’s still something real that increases prices for millions of people. Despite not being Friedman’s “inflation”, they affect the purchasing and investment decisions of millions of people and will likely affect our investment returns. They too deserve portfolio changes to avoid losses.
Perhaps we need new terms to effectively discuss them while preserving the distinctions so we know which of our current troubles we are talking about.
The nuance here is distinguishing between an indictment of anti-Trump media propaganda and a defense of Trump. I hope it’s clear they’re very different things. But that’s only a small slice of the larger issue, which is a coverup for the Fed.
Also in distinguishing between the media carpet-bombing the public daily on the costs of tariffs from a far more truthful admission that all taxes, not just tariffs, take purchasing power just the same.
I don’t deny for an instant that the war is costing people a lot. The costs are real. War is a double whammy, expending real resources to destroy real resources.
We did a deeper dive on tariffs in Tariffs Are Not Inflationary. They are absolutely not inflationary.
Of course I’m not saying that they don’t increase prices, as you correctly point out. The media issue is context. As I’ve argued many times, all government spending is paid for somehow. It’s not manna from heaven. Purchasing power is taken from citizens by the government. The media however have been pretending that tariffs are somehow unique in this respect. But all forms of tax do the same. Sales taxes do it directly. But count the number of hit pieces on sales taxes over the past year or so. Nowhere near the tariff count!
Income taxes do the same, they just take the money before it’s spent instead of as it’s spent.
Yet all three are at least “honest” taxes. Somebody gets a bill. They know who took their money.
Not so with inflation. It’s the most insidious tax of all. Not one payer in a thousand knows who took their purchasing power. The media sure aren’t telling them … they’re busy telling diversionary tales. Politicians feel less need to justify spending if they don’t have to send voters a tax bill either, so the cost-benefit analysis is short-circuited. Given the various ways to fund a given level of government spending, almost any form of direct taxes, whether tariffs, sales taxes, income taxes, or what-have-you, is more benign than inflation.
Yet this is what our media are covering up for.
Well, Trump and Hesgeth are starting wars and then demanding they be funded by extra military spending so yes some of it is directly attrituable to Trump (or whoever is advising him) but the point is well made. It’s the money printing.
Interestingly I’m reading a book ” the Time Travellers Guide to Medieval England”.
It covers 1300 to 1400. The price of ale, wine and bread were the same at the beginning and end. However massive price fluctuations did occur. eg At times corn prices did increase massively due to harvest failures while luxury goods plummeted at the same time.
Conversely in the year of the great plague prices plummeted with horse and cattle decreasing to a 1/6 of their value the previous year. And labour was more expensive after the great plague.
It’s quite amazing how the public have been conditioned to think inflation is always and everywhere a natural phenomenon!
Oh absolutely war is inflationary. My beef is covering for the Fed … it’s all Putin and Trump and no mention whatsoever of the Fed hammering rates down to zero for a decade and printing by the trillion.
Even the way war is inflationary isn’t the way they portray it. The bulk of the recent oil price increases aren’t even inflationary, they’re real … not the result of dollars losing value due to increased supply but of oil gaining value because of reduced supply.
War is inflationary because that’s the way it’s paid for. The government borrows the money, but instead of paying it back, it creates the money, much like a counterfeiter running a printing press in the basement. That inflation mostly has yet to be seen, though. It isn’t driving up oil prices yet.
While we’re at it, we could even go a step further and make the case that not only does war cause inflation, but that inflation causes war. Is it just a coincidence that the Federal Reserve was created just before the outbreak of WWI? Is it just a coincidence that the wars in Ukraine and Iran followed massive inflationary binges?
If it seems outlandish, consider for a moment how far any administration would get if it had to pay for its war making by raising taxes. Imagine GWB coming on TV and saying hey I want to go to war in Iraq. Get Saddam and those WMD. It will cost your family of four about $40,000. How about it?
That war cost the US about $3T. Over a population of 300M, that’s about $10,000 for every man, woman and child in the nation. We all paid for it, but the cost was hidden in inflation.
Without inflation, most wars just wouldn’t happen.
The Federal Reserve is Why the People are Unhappy
I’m not sure if it holds that most wars wouldn’t happen without inflation. Most wars are sold as an investment opportunity. How? By promising to gain more in wealth by stealing the wealth and resources of the opposing side.
If you score an outright victory you get rich. England funded its colonial era via the creation of the Bank of England. This led to extracting the world’s resources, taxing the colonised and England becoming wealthy.
The problem now is funding wars are a bad investment for the US people as a whole but financially beneficial for the war manufacturers.