John Williams Forecasts: “Catastrophe Ahead”
September 1st, 2011
In his article Are Pessimistic Consumers’ Fears of High Inflation Exaggerated?, Daniel Gross writes:
…this alarmism over inflation on the part of consumers is nothing new, and it may not be warranted. We’ve given a lot of grief to professional forecasters, who never seem to know when a recession is about to begin or end. But when it comes to projecting inflation, the amateurs don’t do very well, either.
there are a host of individuals and companies who benefit from freaking people out about inflation — i.e. gold bugs, bond vigilantes, politicians who believe that the Fed, simply by printing more money, creates inflation.
Given that people seem to be incorporating higher inflation into their mindsets, perhaps policymakers should consider indulging them.
Last time we checked, inflation occurs when those responsible for issuing the currency, be it a Roman emperor who controlled the content of precious metals in coinage or a central bank that controls the money supply, is solely responsible for the resulting price inflation.
How else, save trillions of dollars in quantitative easing, can we explain the exorbitant price increases in commodities like food and gas over the last forty years? Yes, Mr. Gross, the Fed, simply by printing more money, does, in fact, create inflation. A third grader can understand this basic concept, that when you artificially create something, its value goes down.
The reason people “seem” to be incorporating higher inflation into their mindsets is because policymakers have already indulged them. Isn’t this exactly the current policy of the Fed?