Monetary Policy

The standard line among most economists is that deflation is as bad or even worse than inflation. In reality, the economy needs deflation now more than ever.

The standard line among most economists is that deflation is as bad or even worse than inflation. In reality, the economy needs deflation now more than ever.

Various inflation measures conceal more than they reveal, largely because they exclude measuring a large portion of high-inflation items.

Governments take valuable things like paper and minerals, stamp something on them, and call them money, in the process rendering these things almost worthless. Something is wrong with this picture.

Governments take valuable things like paper and minerals, stamp something on them, and call them money, in the process rendering these things almost worthless. Something is wrong with this picture.

Inflation is not neutral, it is a hidden tax, a distortion of entrepreneurial signals, and a corrosive force against social trust.

When inflation heats up because central banks hold interest rates to artificially low levels, the standard approach is for central banks to increase interest rates. The better policy is not to artificially manipulate interest rates at all.

Mainstream economists, not to mention most financial journalists, claim that deflation is as bad or worse than inflation. The Austrians know better. We need deflation and we need it now.

Are rising oil prices responsible for inflation? While some economists and many in the media make that connection, the reality is much different. Inflation occurs because of expansion of the money supply.

Although Federal Reserve policies are claimed to try to target the neutral rate of interest, it is not possible for that to be accomplished through monetary central planning.