To really fight inflation, you have to fight the Federal Reserve

These days, the Fed and Chairman Jerome Powell are claiming the title of 'inflation fighters.' The more appropriate moniker should be 'inflationists.'

There are surely other worlds than this—other thoughts than the thoughts of the multitude—other speculations than the speculations of the sophist.
—Edgar Allan Poe, “The Assignation”
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When people talk about money, they often say things that aren't true or aren't what they say they are.

Over the last twenty-five months, prices have gone through the roof. This is called inflation. Why? Since prices have gone up so much. Under the guise of fighting inflation, the criminals who run the government even passed a spending bill that would cause inflation. The thinking is that they can do whatever they want because we can't stop them.

In the world of make-believe we live in today, inflation is an increase in the amount of money and is the same as counterfeiting (an exchange of nothing for something). Ryan McMaken says, "During the thirteen months between April 2020 and April 2021, money supply growth in the United States often went above 35 percent year over year, which is much higher than the 'high' levels seen from 2009 to 2013."

Metrics about the money supply don't make the front page. Most accounts tell us that prices are going up, or that the Consumer Price Index (CPI) is going up. Everyone seems to use the terms "inflation" and "CPI inflation" as if they were the same thing.

Not at all. An effect of inflation is a rise in the CPI.

Changes in the money supply can have an effect on prices, among other things. Prices go up when people have more money. The opposite is true when production and distribution become more efficient. Both work at the same time. Prices can stay the same while the Federal Reserve System makes more money available. This is what happened before the Crash of 1929.

Since the Fed's Federal Open Market Committee, which controls the money supply, wants an annual CPI inflation rate of 2%, they have to figure out how to measure the infinite complexity of the market so they can change the money supply. So it's not surprising that a Fed official thinks economics is hard.

But wait. Joe Biden wants the Fed to make sure that its two main goals, "maximum employment and price stability," are also met. Is this a call for making things right? Who better than a government agency that can make money whenever it wants to pay for what needs to be done?

If that happened, what would happen to price inflation?

Aside from paying back debts, the Fed has been increasing the value of the dollar on purpose for a while. Using an inflation calculator, I found that prices rose at a rate of 2.13 percent per year from 2017 to 2019. The Federal Open Market Committee would be happy about this. Prices have gone up 4.67 percent every year since 2020, which was the year of covid hysteria. Oops.

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How Did We Get into This Mess?

After the Civil War, we had one of the most prosperous times in our history, and maybe in all of history. It was a time when there was neither a central bank nor a tax on income. No one was in charge of making sure that macroeconomic or racial goals were met. No one acted as the last-resort lender. The market, not a bunch of bureaucrats, was given most of the power over monetary policy. Gold and, to a lesser extent, silver coins were used as money, and paper money was used as a convenient alternative.

What happened to prices during this time? There was none between 1870 and 1900. The dollar was able to buy more things. According to the Consumer Price Index (CPI) from the Bureau of Labor Statistics, the rate of deflation was 1.47 percent per year.

By 1900, the average price was 35.88% less than it was in 1870. People got paid to save, and the economy did well. Contrary to the myth that a committee must increase the money supply to avoid deflation and a recession, the American economy did its best without any help from a committee or the CPI.

In the late 1800s, banks didn't care about demand deposits and did fractional reserve banking instead (as banks have always done almost without exception, including today under the Fed). They only kept a small amount of deposits in reserve and loaned the rest. This caused panic when many banks found themselves without enough reserves.

Instead of admitting that fractional reserves had problems (see here and especially here), bankers criticized commodity money for not being "flexible." Some of the most powerful bankers and politicians decided to do something about this problem. In the fall of 1910, they met secretly on Jekyll Island, Georgia, to work out the details of a banking cartel that would become the Federal Reserve Act of 1913.

One of the people at Jekyll Island was Rhode Island Senator Nelson Aldrich, and the plan that came out of it was named after him. Aldrich was a Republican, which made it hard for the bankers to get the plan passed in a Congress controlled by Democrats. When Woodrow Wilson, a Democrat, became president in 1912, the so-called Aldrich Plan came back under the leadership of Carter Glass, a Democrat from Virginia. Glass, like most politicians, didn't know much about banking and relied on hired help.

If the truth had won, the banking bill should have been named after banker Paul Warburg of Kuhn, Loeb, who was the main person behind the Aldrich Plan. One writer said of Warburg that he was "the most mild-mannered man who ever led a revolution."

Officials in the government denied the Fed's secret start for almost a century, but in 2010, Ben Bernanke and his coworkers celebrated the Fed's start on Jekyll Island.

Murray Rothbard says this about how the bankers won:

Following the crucial plank of post–Peel Act Central Banking, the Fed was given a monopoly of the issue of all bank notes; national banks, as well as state banks, could now only issue deposits, and the deposits had to be redeemable in Federal Reserve Notes as well as, at least nominally, in gold. . . . The Fed was now in place as lender of last resort; and with the prestige, power, and resources of the U.S. Treasury solidly behind it, it could inflate more consistently than the Wall Street banks under the [previous] National Banking System, and above all, it could and did, inflate even during recessions, in order to bail out the banks. The Fed could now try to keep the economy from recessions that liquidated the unsound investments of the inflationary boom, and it could try to keep the inflation going indefinitely. (emphasis added)
Since World War I, the Fed has also been an important part of running wars.

What should we learn from the story? When you talk about inflation, you should talk about the Fed, which is the only organization responsible for increasing the amount of money in circulation and causing social and economic chaos as a result.