Joe Biden spent quite a bit of time during his recent press conference discussing the price of hamburgers, and how it’s the fault of the “Big Four” meat companies, despite little evidence in support of his assertion. No, inflation is occurring for the same reason it always occurs, too many dollars chasing too few goods. At LewRockwell.com, Alasdair Mcleod explains the real origins of inflation, and what can be done to stop it. He writes:
In recent weeks inflation has become a major economic concern. Nearly all the commentary emanating from monetary policy makers, economists, and the media is misguided, believing inflation is rising prices and must be addressed accordingly.
They are only the symptoms of inflation. The true cause is the expansion of currency and bank credit, which, reflected in the US dollar’s M2 money supply has increased substantially since March 2020, and now stands at nearly three times the level when Lehman failed.
After defining the differences between money, currency, and credit which together make up the media of exchange, this article explains how changes in the quantities of currency and credit translate into prices.
The solution to the inflation problem is not price controls, which are always counterproductive, but to return to a regime of sound money. This article shows what must be done to achieve this outcome and concludes that it is impossible to do so without a sufficiently serious financial and economic crisis to discredit government intervention in markets and to then allow governments to stabilise their currencies and reduce their spending to a bare minimum.
Defining inflation, money, currency, and credit.
Read more here.
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