Economics

This appeared in the New York Times today.

“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Jerome Powell, the Fed chair, said during a speech at the Kansas City Fed’s annual conference in Wyoming. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

Contrary to this statement, I do not believe that slower growth will bring down inflation. Nor do I believe that increased growth will cause inflation.

The effect of growth on inflation is neutral.

What is the inflation index? It is the amount of bioavailable money divided by the number of bioavailable humans while understanding that an increase in “stuff” increases the bioavailability of humanity.

An increase in economic activity increases both bioavailable money and bioavailable humans. Likewise a decrease in economic activity decreases both bioavailable money and bioavailable humans. Thus, productivity has no effect on inflation.

None.

The government’s belief that slower growth will bring down inflation is false.

Moreover, its promotion of such is a deception.

It is a clever deception to distract you from the truth which is that an increase in the bioavailable money supply causes inflation.

The inflation that we have was caused by the Federal Reserve and the US Treasury.

Simply put, they printed up too much money.

The proper solution is to decrease the bioavailable money supply, thus the necessity to increase interest rates.

Raising interest rates will control inflation.

In our case the Fed should be more aggressive.

Unfortunately for us, the Fed fiddles while Rome burns.

If the Fed were serious it would speak with actions instead of words.

Instead, Jerome Powell issues warnings.

Hey, man, don’t tell me, show me.

Show me the beef!

If you think inflation is that big a problem, and it is, get off your ass and raise the interest rates immediately.

As George Wallace once said about Vietnam – another calamity courtesy of our elites: “We’re pussyfootin’ around in Vietnam.”

We’re pussyfootin’ around here as well.

The big story people will be talking about for a long time now will be the lack of aggressiveness of the Fed in controlling inflation in 2022.

The Fed apparently is going slow because of fear in plunging the economy into recession.

They needn’t fear that.

America can easily handle a prime rate of 8 to 9% – well above what we have now.

It can handle it because it has handled it.

By going slow in controlling inflation, with its measly 0.75% increases in Federal Funds rate, the Fed is slowly bleeding America to death.

Inflation will continue to be high, yet jobs will slowly dwindle away.

The Fed, paralyzed by a false theory that increased productivity will cause more inflation, will refuse to raise interest rates in a much more dramatic level.

Look for fifteen years of unnecessary pain.

A lot of people are going to be hurting.

It need not be that way.

Unfortunately, we live in the modern age where the permissive parent is afraid to spank the child lest the insecure parent lose their child’s love. In this case, the Fed is the parent, and the child is Corporate America which has been feasting on easy money.

What is needed here is bold action.

Junior needs a spanking.

A strong increase in interest rates will rapidly shrink up the money supply.

Inflation will fall under control, and with it consumer confidence will restore.

Yes, of course, growth will rapidly fall off, but the pain will be much shorter in duration than the pain the Fed is now leading us into.

Copyright 2022 Archer Crosley All Rights Reserved