Power & Market

How ’Bout that Christmas Inflation?

This holiday season, it might be interesting to bring up the topic of “inflation.” A simple “how ’bout that inflation?” could likely prompt those around you to share their grievances, from the rise in cost of food, groceries, and cars, to their Netflix subscription.

While on the topic of movies, you could discuss whether they’ve seen any great films and speculate how long the era of blockbuster franchises can last. Hollywood may not be immune to price increases either. Indiewire claims:

Only One 2023 Movie with a Budget Over $200 Million Has Made a Profit (So Far) This Year

Like many other facets of life, Hollywood budgets are being “inflated” as well. Yet the word “inflation,” commonly used today, is not actually correct. Whether by manipulative design, loss of knowledge, or both, inflation originally referred to the act of increasing money supply.

The effects? For starters, the ongoing loss of purchasing power year after year. The Federal Reserve, since its clandestine inception and Congress’s acquiescence, has done an astounding job of debasing the US Dollar for over a century. Since 2022, the Federal Reserve has shrunk its balance sheet by over $1 trillion. As history shows, this process normally doesn’t end well.

The United States is only about $55 billion away from a $34 trillion debt level. The $1.7 trillion student loan debt stands as the country’s largest asset. To no surprise, lending $1.7 trillion to students across the country has also inflated the price of education.

Naysayers might argue that “inflation” is good for the economy, championed by mainstream economists, Fed members, and highly paid experts on TV. Nobel Prize winning economists advocate yearly price increases to ensure we have a smooth functioning economy.

Perhaps offer a light read on the topic of  Austrian economics, such as Henry Hazlitt’s What You Should Know About Inflation, or a reasonably priced copy of Mises’ Human Action as a gift.

As the year comes to a close, headlines suggest prices are finally coming down, implying the Fed has everything under control. A similar sentiment can be said about Venezuela. Recently, a Spanish newspaper, El Pais reported positive news:

… price indices in Venezuela are finally beginning to lose ground. The Central Bank tables average a rate of 3.2% in the month of November, the lowest in many months in the country…

This sounds promising, yet:

The current annual average stands at 185%...

While this is hardly Venezuela, it is critical to look beyond the headlines. Every year we struggle with currency debasement. Unless “negative inflation” or “deflation” occurs, which the Fed abhors, the cost of living will only rise year after year. We find ourselves working more, producing more, only to save and spend less than the year prior. Inflationism as monetary policy is backed only by economic dogma and popularity. There is no economic benefit to the general public under such a system.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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