The Fed may slow or eliminate new bond purchases but is not planning to sell. Meanwhile, producer prices have skyrocketed and Americans are consuming more but producing less. Get ready for entrenched price inflation.
Crack-up booms have historically facilitated the growth of authoritarian political movements. This is not inevitable. But we do need radical change to today's fiscal and monetary disasters.
Deflation empowers the citizen by allowing her modest savings to purchase more goods over time. Inflation empowers the state by reducing the size of its enormous debts in real terms—and through the inflation tax.
The current system of freely fluctuating paper currencies with the US dollar as reserve currency would not have been possible without political centralization of monetary systems.
Thanks to covid shutdowns, declining productivity finally brought price inflation to the fore. But the world's governments have learned nothing and cling to the same inflationist policies.
The central bank can manipulate the interest rate to whatever level it desires. But it cannot control how the interest rate is dictated by each individual's time preference. That's a problem.
Europe's governments are caught up in a destructive symbiotic relationship with Europe's central bank. If they don't end QE and cut debt, they face some very hard times ahead.
The Fed admits inflation is a problem, so now begins the search to find a fix that doesn't involve a recession or anything else that might allow the economy to heal its malinvestments.
The huge amounts of monetary inflation of 2020 have indeed been translated into price inflation in 2021. Yet with the Fed now poised to slow things down, we might find asset inflation could suddenly go into reverse.
Easy money monetary policy only serves to weaken and destroy savings and investment. And that means weaker future economic growth.
