Wednesday, February 18, 2009

What is "inflation?"

In The Revolution: A Manifesto, Ron Paul explains inflation:

Ludwig von Mises used to say that governments will always try to get people to focus on prices when thinking about inflation. But rising prices are a result of inflation, not inflation itself. Inflation is the increase in the money supply. If we understood inflation that way, we would instantly know how to cure it: simply demand that the Federal Reserve cease increasing the money supply. By focusing our attention on prices instead, we are liable to misdiagnose the problem, and we are more apt to accept bogus government
"solutions" like wage and price controls, as in the 1970s.

Unfortunately, the MSM is more interested in Helicopter Ben's thoughts and actions:

Federal Reserve policy makers introduced a long-term U.S. inflation estimate, with most officials aiming to anchor public expectations at a 2 percent rate...

“Increased clarity about the FOMC’s views regarding longer-term inflation should help to better stabilize the public’s inflation expectations, thus contributing to keeping actual inflation from rising too high or falling too low,” Chairman
Ben S. Bernanke said today in a speech in Washington. (Bloomberg News, By Steve Matthews)

The public's expectations have nothing to do with inflation.

Inflation occurs when money grows on trees.

Tim White

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