{"id":1567429,"date":"2022-07-23T06:00:04","date_gmt":"2022-07-23T10:00:04","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1567429"},"modified":"2022-07-23T07:49:34","modified_gmt":"2022-07-23T11:49:34","slug":"the-relentlessly-peculiar-notion-of-government-fighting-inflation","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/the-relentlessly-peculiar-notion-of-government-fighting-inflation\/","title":{"rendered":"The Relentlessly Peculiar Notion Of Government &#8220;Fighting&#8221; Inflation"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">16<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fthe-relentlessly-peculiar-notion-of-government-fighting-inflation%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1567429&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><div><\/div>\n<p><em>By John Tamny for RealClearMarkets<\/em><\/p>\n<p>It\u2019s an old saying, maybe an overused one, but early 20<sup>th<\/sup>\u00a0century writer Randolph Bourne observed about war that it\u2019s \u201cthe health of the state.\u201d Well, of course. Governments get us into war, so it\u2019s only logical that the power of government would grow in times of it.<\/p>\n<p class=\"second_ad_p\">An obvious corollary to the above is something yours truly has written, but surely isn\u2019t the first to have written.\u00a0<em>If war is the health of the state, then economic crises are the state\u2019s oxygen<\/em>. Well, of course.<\/p>\n<p class=\"second_ad_p\">Even though the natural state of humans is to grow based on our desire to get things, economic crises invariably reveal themselves.<\/p>\n<p><strong>RELATED: <a href=\"https:\/\/thepoliticalinsider.com\/thievery-doesnt-cause-inflation-and-neither-does-government-spending\/\" target=\"_blank\" rel=\"noopener\">Thievery Doesn\u2019t Cause Inflation, And Neither Does Government Spending<\/a><\/strong><\/p>\n<p>In thinking about economic crises, you really can\u2019t talk about them without contemplating the\u00a0<em>government intervention<\/em>\u00a0that instigated them. Growth is yet again our natural state, so is individual contraction on occasion (we all err at times in life and on the job, only to fix our errors), but \u201ccrisis\u201d is an obvious consequence of government.<\/p>\n<p>We know this because as individuals, the fixing of our errors is the path to better times ahead. In other words, we the people can\u2019t cause broad economic slowdowns. How could we? Only governments do that by erecting barriers to production: think taxes, tariffs, regulations, and unstable money that to varying degrees slow our ability to produce.<\/p>\n<p>All of this and more came to mind while reading recently about \u201cinflation,\u201d and the federal government\u2019s \u201cfight\u201d against it. How very odd when you think about it. As my great friend Bob Reingold points out, such a statement implies an opposing force; a bad, inflationary one that a good, benevolent one (our federal government) is at war with. Except that there isn\u2019t an opposing force.<\/p>\n<p>As this column has forever argued, devaluation is a policy choice. Governments are logically the only source of inflation, which reminds us yet again of how \u201ceconomic crises\u201d are the state\u2019s oxygen. Think about it. The very entity that caused what some would deem \u201cinflation\u201d is being empowered to fight the beast it created. Where\u2019s the outrage, or something like that.<\/p>\n<p class=\"sixth_ad_p\">All of which requires a digression, though some won\u2019t see it as that. The Fed is being empowered to \u201cfight\u201d inflation. What\u2019s strange is that no one is asking why. The dollar\u2019s exchange value has never been part of the Fed\u2019s policy portfolio. More realistically, the Fed was created as a lender of last resort to\u00a0<em>solvent banks<\/em>\u00a0in 1913, only for it to quickly become clear that a solvent bank would never go to the Fed for funds.<\/p>\n<p class=\"sixth_ad_p\">The Fed pivoted to become a lender to the insolvent, thus weakening the banking system. See above. In a free economy, we gain from the freedom to correct our mistakes. Governments occasionally intervene as we correct. Government is the crisis.<\/p>\n<p><strong>RELATED: <a href=\"https:\/\/thepoliticalinsider.com\/democrats-push-tax-hike-on-rich-to-fight-inflation-as-americans-struggle-and-midterms-loom\/\" target=\"_blank\" rel=\"noopener\">Democrats Push Tax Hike On Rich \u2018To Fight Inflation\u2019 As Americans Struggle And Midterms Loom<\/a><\/strong><\/p>\n<div id=\"subscribe\" class=\"email-signup inarticle\">\n<h4>Support Conservative Voices!<\/h4>\n<h5><strong>Sign up to receive the latest<\/strong> political news, insight, and commentary delivered directly to your inbox.<\/h5>\n<\/div>\n<p>In addition to the Fed\u2019s creeping mission as a lender of last resort to the insolvent, it\u2019s also a bank regulator, plus it aims to influence the overnight rate at which banks lend to each other. Extra points if from this you conclude that the Fed is superfluous. Market actors are able lenders of last resort, the stock market itself is the ultimate regulator, and as for overnight lending rates, to pretend the Fed is necessary there just isn\u2019t serious.<\/p>\n<p>Despite this, the very odd consensus today is that the Fed must \u201cfight inflation\u201d by raising the overnight rate at which banks lend to one another. \u201cTight money.\u201d How ridiculous. The economy is global. What the Fed takes will be made up for in seconds by myriad domestic and global sources of credit.<\/p>\n<p>Still, there\u2019s this notion of a valiant Fed \u201cfighting\u201d something. What is it? The notion implies that without the Fed\u2019s responsible ways, the alleged inflation crisis would spiral out of control. Such a view is obnoxious, and that\u2019s being gracious. Governments cause inflation. Always. In the market-driven world of lending, the response to actual inflation is always going to be swift, and for obvious reasons.<\/p>\n<p>No one wants to lend out more than they get back, from which in a natural free market rates of interest would naturally rise as compensation for any devaluation. It\u2019s a long or short way of saying that Fed fiddling with short-term rates to slay inflation is the ultimate non sequitur.<\/p>\n<p>Furthermore, it\u2019s never been said what lending has to do with inflation in the first place. If anything, lending during periods of devaluation would logically shrink. Simple market forces at work. Why lend money out that will come back worth less?<\/p>\n<p>All of which brings us back to what inflation is. It\u2019s a currency devaluation. It\u2019s a policy choice of governments, except that there\u2019s no \u201cfight\u201d required to fix it. Doesn\u2019t anyone understand simple history? After Germany\u2019s government destroyed the mark after WWI, the eventual fix took a week.<\/p>\n<p><strong>RELATED: <a href=\"https:\/\/thepoliticalinsider.com\/3-out-of-4-middle-class-families-are-falling-behind-as-prices-rise\/\" target=\"_blank\" rel=\"noopener\">3 Out of 4 Middle Class Families Are Falling Behind As Prices Rise<\/a><\/strong><\/p>\n<p>Assuming we have inflation today, it\u2019s no fight for Treasury to communicate an intent to shore up the dollar\u2019s value. If so, currency traders will end the inflation between breakfast and lunch. No government intervention needed other than the issuer of the dollar making plain a desire for a stronger currency.<\/p>\n<p>Still, not asked enough is if today\u2019s higher prices are inflation. Prices can rise for all sorts of reasons, most of them not having anything to do with inflation. Notable here is that since January of 2021, the dollar has risen against foreign currencies and gold. In other words, this would be the first \u201cinflation\u201d in the history of mankind that didn\u2019t include a devaluation. It\u2019s something to think about as we oxygenate our federal government with a decree to \u201cfight.\u201d<\/p>\n<p><em>John Tamny is editor of RealClearMarkets, Vice President at FreedomWorks, a senior fellow at the\u00a0<a href=\"https:\/\/marketinstitute.org\/\" target=\"_blank\" rel=\"noopener\">Market Institute<\/a>, and a senior economic adviser to Applied Finance Advisors (<a href=\"https:\/\/www.appliedfinance.com\/\" target=\"_blank\" rel=\"noopener\">www.appliedfinance.com)<\/a>. His most recent book is\u00a0<\/em><a href=\"https:\/\/www.amazon.com\/When-Politicians-Panicked-Coronavirus-Opinion\/dp\/1642938378\/ref=sr_1_2?crid=3PX3C25B2L6I4&#038;dchild=1&#038;keywords=john+tamny+when+politicians+panicked&#038;qid=1604355246&#038;sprefix=John+Tamny%2Caps%2C147&#038;sr=8-2\" target=\"_blank\" rel=\"noopener\">When Politicians Panicked: The New Coronavirus, Expert Opinion, and a Tragic Lapse of Reason<\/a><em>.<\/em><\/p>\n<p class=\"disclaimer\">The opinions expressed by contributors and\/or content partners are their own and do not necessarily reflect the views of The Political Insider.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By John Tamny for RealClearMarkets It\u2019s an old saying, maybe an overused one, but early 20th\u00a0century writer Randolph Bourne observed about war that it\u2019s \u201cthe health of the state.\u201d Well,<\/p>\n","protected":false},"author":1,"featured_media":1575238,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1567429","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1567429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1567429"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1567429\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1575238"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1567429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1567429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1567429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}