Monday, December 15, 2014

The False Promises of Two Percent Price Inflation

Richard Ebeling emails:

Dear Bob,

I have a new article on the news and commentary website, "EpicTimes," on "The False Promises of Two Percent Price Inflation."

Central Banks around the world have found a new panacea to all the economic problems of the world: a target two percent annual price inflation brought about by activist monetary policy.

Separate from the illusion that simply manipulating a rise in prices will "cure" an "ailing" economy," the entire mind set of the monetary central bankers is dominated by the Keynesian focus on macro-aggregates of total output and employment, and aggregate demand and aggregate supply.

The fallacy here is that such statistical aggregates and averages do not exist they are creations of the economist and the statistician. The real economy is made up of all individual supplies and demands and their interrelated relatives prices and wages.

The Austrian economists have effectively shown that by distortion the micro-economic relationships between all the individual demands and supplies and individual prices and wages through money and credit expansionary policy, governments and central banks cause the unemployment and economic instability they claim want to reduce.

The only real solution in an end to government and central bank control over the monetary and banking systems.


1 comment:

  1. Richard is quite right. In New Zealand, where the 2% inflation regime has been in force since 1990, it has simply been an extra source of revenue for the government which the reserve bank patches up the hole in its accounts by putting up interest rates.