Magazine article The New American

The Fed Exists to Inflate

Magazine article The New American

The Fed Exists to Inflate

Article excerpt

ITEM: The Dow Jones Newswire for March 17, headlined "February's Consumer Prices Show Tame Inflation," reported: "The growth of" U.S. consumer prices slowed last month as prices of energy and housing moderated, suggesting the global economic recovery isn't stoking inflation." The Consumer Price Index "rose 0.3% in February, slowing from a 0.5% increase in January...." These statistics "also validated the Federal Reserve's judgment that inflation will stay low this year, giving the central bank the freedom to keep interest rates low."

BETWEEN THE LINES: In this report, and far too many others, the difference between cause and effect is confused. Inflation, properly defined, is an increase in the supply of money and credit in the economy. Yet as the distinguished Austrian economist Ludwig von Mises once explained: "What many people ... call inflation or deflation is no longer the great increase or decline in the supply of money, but its inexorable consequences, the general tendency toward a rise or fall in commodity prices and wage rates."

Congressman Ron Paul (R-Texas), who sits on the domestic monetary policy subcommittee, observed not long ago that Alan Greenspan and other policymakers of the Fed have "more than doubled the M3 money supply in less than ten years." However, running more Federal Reserve notes off the printing presses does not make Americans richer--it dilutes purchasing power. Since the Fed was created, notes Lew Rockwell, the president of the Ludwig yon Mises Institute, "the dollar's value has plummeted to less than a penny. …

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