According to an article in the New York Times, Federal Reserve Chairman Jerome Powell says that current rapid price growth in the economy is due to such factors as “snarled supply chains, an oil shock following Russia’s invasion of Ukraine, and a shift among American consumers from spending money on services like travel and dining out to goods like furniture.”
In other words, according to Powell, the soaring prices have nothing to do with the devaluation of money owing to the Fed’s policy of monetary debauchery. Powell specifically maintains that out-of-control federal spending, which increases the government’s massive debt, which the Fed has long monetized with newly printed, cheapened, debased paper money, has nothing to do with the currently soaring prices.
I wonder if Powell would say the same thing about Zimbabwe.
According to an article in the Wall Street Journal, Zimbabwe is the country that has the $100,000,000,000,000 bill. In January price inflation hit 230%.
Snarled supply chains? Oil shock from Russia’s invasion of Ukraine? Zimbabwe consumers shifting their consumption habits? Are those the causes of Zimbabwe’s soaring prices?
I don’t think so. And I really don’t think Powell thinks so either. Zimbabwe officials, like U.S. officials, like to spend other people’s money. And like U.S. officials, they spend more than what they bring in with taxes. They either borrow the difference or they print the money to cover the difference. If they borrow the difference, they print the money to pay off the debt.
All that printing of money causes the value of everyone’s money to fall. That fall in value is reflected by an increase in prices across the board in the economy. The greater the quantity of money being printed, the higher prices will soar to reflect the debasement of the money. The soaring prices simply signify that the purchasing power of money is being diminished by the central bank’s monetary debauchery.
I wonder how Powell would explain the continuous drop in purchasing power, decade after decade, of the dollar ever since the Fed was established in 1913. Obviously, he couldn’t blame that continuous drop in value on snarled supply chains, oil shocks, and shifts in consumer tastes.
The problem is that Federal Reserve officials, like other federal bureaucrats, loathe the idea of taking personal responsibility for their mistakes, misconduct, and dysfunctional system of monetary central planning. It’s always easier to find scapegoats. I’m just surprised that Powell didn’t also mention illegal immigrants as another factor for soaring prices. They always make good scapegoats.