Falsehoods (13) and Myths (4) of National Economic Policy

The official aim of the FED’s inflation is to reduce unemployment. The FED has a dual federal legislative mandate: price stability and full employment. In periods of high unemployment, the FED speeds up its usual inflation of the currency in an effort to reduce the unemployment. That’s the official story.

The official mandate spells out the FED’s legal or de jure framework. The FED’s actual or de facto activity is to inflate 90 percent of the time. In boom times, the FED inflates. In periods of moderate unemployment, the FED inflates. During periods of war, when unemployment is not high, the FED inflates in order to support the bond issues of the federal government. From 1918 to the present, there are at most a handful of brief periods, lasting perhaps 10 years in total, in which the FED did not inflate the currency. The FED was set up to inflate, and that’s what it does. And, by the way, there is no other cause of inflation but the FED.

The cause of inflation is misundertood by many. Inflation is not rising prices. Rising prices are a result of inflation. Inflation is an increase in the amount of money in the economy - inflating the money supply. This results in more dollars - available to the Fed's pet banks - chasing the same amount of goods. The increased supply of dollars - which have no intrinsic value and are not redeemable in gold or some other stable commodity - devalues the fiat money and, as they filter down to you and me, we spend more, increasing demand and raising prices. The Fed is inflating. Prices will rise. Wages will rise less and we will all be poorer.