Washington, DC – December 10: President of the Federal Board … more
Fed officials do not understand inflation. If they understood what they were, they would not be so worried about the so -called Fed’s so -called independence.
For background, think of a recent New York Times part From the former chairs of Federal Reserve Ben Bernanken and Janet Yellen. While they are no longer in the central bank, their ideas for inflation remain. And what they imagine that inflation talks about the real problem in the Fed.
In an attempt to make a case of central bank independence, Bernanken and Yellen looked back in time until 1972, they argue that “President Richard Nixon pressed the Fed Arthur Burns chair to keep rates low in front of the 1972 elections to provide a short -term.” They argue that “the result, however, was the station”. Bernanken and Yellen Surges.
Inflation is a shrinking of the monetary medium, in our case the dollar. The latter happened with design in August 1971, when Nixon, despite Burns’ passionate efforts to persuade him not to cut the dollar with gold. Nixon’s act was inflation itself, as any action intended to shrink the exchange of value of the average exchange. Nixon got the dollar he wanted, which means he got inflation.
As for the subsequent pressure of Nixon, it is simply ignored by Yellen and Bernanke that people lend money for what they can exchange. It is a reminder that the credit has not been ordered by central bankers, but is produced privately. That is just a comment that no one borrows to borrow, probably borrow take. In other words, Burns could not order the credit cheap and easy even if he wanted. Markets always speak.
Bernanken and Yellen continue to promote the fiction that the end of the 1970s inflation was a result of Paul Volcker’s “monetary tightening” that “led to a painful recession”. In this case, the former Fed chairs have unwittingly rejected them to join their hands with the happy speakers who to date embrace the false that the repair repair puts people out of work. No, such a view is not serious.
There is no pain associated with the ending of inflation simply because there is no pain that must exist in the monetary means that are consistent as value measures. When we remember that the only purpose of the money is to facilitate the exchange of goods, services and work, it is easy to see that there is nothing economically harmful or difficult to conceive of inflation. The latter is as simple as the association of this currency with stability as a measure of value.
Which is a reminder that inflation is a politics choice, not a long and painful hiking behind the proverbial abyss. Just connect the dollar to something known to be stable and the rest will take care of itself.
Just as President Nixon was able to deal with inflation in the US and the world with the decoupling of the dollar association with gold, any president today (including Donald Trump) could end inflation by decree to repeat the stability of the dollar,
All this is talking about the real problem in the Federal Reserve right now. This is not “independence” or lack. The Fed is a political creation, so it was never independent.
What is needed is a reliable dollar, but for the problem that neither Bernanken nor Yellen, nor on this issue in the American treasury, understand what inflation is. We have a problem with the secretion of inflation, nothing else.
