The Federal Reserve Is a Disease Masquerading as Its Own Cure

“The Fed decided some years back to create inflation of at least 2%. Inflation causes two major harms. The first is wage earners lose buying power as prices inflate. The second is that the government is able to repay debt with inflated dollars, which means that bondholders also lose because of the deflated value of the dollar.”

“The Fed’s creation of 2% inflation is an outrage and grossly unfair to wage earners, as noted in my TAS article in February 2016. It gets worse. We now have a proposal to inflate the currency to 4%, a suggestion by Olivier Blanchard, a Peterson Institute economist. This idea was initially ignored, but the Wall Street Journal reported last week that it “is getting new life.” The Fed is considering this idea is because it provides another monetary tool to manipulate the money supply and interest rates.”

“It should be clear that individuals and corporations that own hard assets could be rewarded by inflation. Everyone else, most of our citizenry, suffers and loses buying power.”

Ludwig von Mises, very clear on this point in his 1944 book, Bureaucracy, stated that “economic interventionism is a self-defeating policy. The individual measures that it applies do not achieve the results sought.” The Fed is an excellent case in point.”

“In Mises’s view, “interventionism is an inherently unstable policy because it creates new dislocations that would seem to cry out for further interventions, which, in turn, do not solve the problem. The end of interventionism is socialism, a fate which can be logically avoided only by a sharp turn towards free markets.”