INTERVIEWER: How do you cure inflation?
HAYEK: You stop printing money.~ Friedrich Hayek, from an interview with Meet the Press, Hat tip David Henderson, who points out that Hayek later goes on to explain it more accurately: "In a sense, stopping the printing presses is a figurative expression, because it is being done now by creating credit by the Federal Reserve System." And it still is!
1 comment:
Simple example today: Joe Biden says fighting inflation is his "top domestic priority" while blaming "the pandemic, coupled with supply chain issues and Russia's war on Ukraine."
Yes, all of those issues have raised specific prices, BUT inflation is a GENERAL rise in prices.
That is to say, in an economic system with a constant supply of dollars, every time a price of a specific good or service rises, by a shortage or whatever other cause, that leaves less to spend on other goods and services, whose prices will tend to sink accordingly. The only way a GENERAL rise in prices can come about in this case is if the supply of dollars is somehow increased...
This phenomenon is not affected by the number of specific prices that are caused to rise. So when the pandemic etc. do cause many specific prices to rise, which they certainly have, then in an economic system with a constant supply of dollars, to the extent that people still purchase these goods and services, this would leave less to spend on other goods and services -- and the prices of these goods and services will tend to dip accordingly.
So he only way a general rise in prices can come is if the supply of dollars has been increased -- which of course it has been, in the way of the Federal Reserve's counterfeit capital (the level of which was increased in 2020 alone at the highest rate in more than 50 years!)
It's a shame Mr Biden is apparently unaware of this simple truth, because no matter how much of a priority he makes flighting inflation, as long as he remains ignorant of it then his efforts thereto will be impotent.
PC
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