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.
The demand for money is key in exchange rates and a major factor in the exchange rate is the relative change in the growth of respective money supplies.
We're told they're hawks now, but the Fed is still thinking the way it has thought for the entirety of the twelve years since 2009, when today’s QE experiment began.
