Inflation is a general increase in prices. The most common reason why prices increase is scarcity.
The current inflation was caused by COVID-related scarcities of oil, food, shipping, computer chips, metals, lumber, labor, and other commodities.
The cure for this inflation is to cure the scarcities that caused the inflation, oil and food being the most important.
The Federal Reserve wrongly believes inflation is caused by too-low interest rates and can be cured by raising them. However, interest is a business cost—a cost for manufacturers, sellers, and buyers.
It should be obvious that raising manufacturing, selling, and buying costs will not cure inflation.
All interest rate increases do is raise costs, slow the economy, and eventually cause a recession.
We repeatedly have written that raising costs via interest rate increases is a terrible way to lower prices.
If excessive federal deficit spending causes inflation how do you explain this graph?
The fight against inflation: To succeed, the Fed must fail
Inflation: Why the Fed is confused
Truly pitiful: Federal false helplessness in the face of inflation
Do interest rate increases fight inflation?
Why interest rate increases don’t cure inflation.
Let’s be clear. Raising the cost of manufacturing, shipping, and consuming does not lower inflation prices.
What next, Fed, applying leeches to cure anemia?
Rodger Malcolm Mitchell
Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell; MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
(Ever wonder why federal spending cuts demanded by debt nuts are designed to widen the income/wealth/power Gap between the rich and the rest, while the few federal spending increases they want are designed to reward and protect the rich?)
#Monetary Sovereignty - Mitchell 
I have probably said this before, but I have been arguing against interest rate hikes for years, and it is nice to see your facts agreeing with my insightful feelings. But no one listens. At least, not the right people. Raising interest rates hits everyone, especially mortgage holders. Do you remember when interexts rates hit the high teens (possibly the low 20s) just three decades ago? That was when I saw the light — interest rate hikes help the moneylenders, not the average Joes and Joans. No matter what the economy is like, the wealthy (overall) never seem to stop making money, though there can be indiividual tragedies.
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The FERAL Reserve now must atone for what they did. They must cease and desist yesterday, and must begin cutting rates immediately and dramatically.
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Rodger … We’d welcome the “Fire Department” to help the man trying to burn the house down. Wonder if the Fed will awaken from its slumber IF seeing how the market is reacting? The stupidity or “wooden headedness”, as Barbara Tuchman calls the syndrome in her book “The March of Folly”, is at full display. Thanks for your continuing words on the matter.
https://www.cnbc.com/2024/08/05/whartons-jeremy-siegel-says-fed-needs-to-make-an-emergency-rate-cut.html Wharton’s Jeremy Siegel says Fed needs to make an emergency rate cut cnbc.com
Roger Meier 6620 S. Potomac Street Unit 213 Centennial, CO 80111 Em: jr2meier@comcast.net C/T: 612-865-6018
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Looks like another country drank the Kool-Aid, and the Randroids are predictably having a field day:
https://www.capitalismmagazine.com/2024/08/did-javier-mileis-free-market-policies-just-lift-argentina-out-of-recession/
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Honestly, I am really not surprised that Milei’s “shock therapy” worked (in the short term) in Argentina. Hyperinflation is, as we know, a different beast altogether than mere high inflation or stagflation, so his sharp fiscal austerity (paired with a currency devaluation, interestingly enough) may very well have been just what the doctor ordered. But unfortunately, if he persists with such policies, he is really only storing up problems for the future.
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The formula for Gross Domestic Product is GDP = Central Government Spending + All Other Spending + Net Exports.
Austerity reduces Central Government Spending and All Other Spending. Currency devaluation increases Net Exports .
Inflation is caused by a shortage of critical goods and services. There is nothing in the “shock therapy” that deals with these shortages. Unless shortages are cured, inflation will return. Firing government workers doesn’t cure inflation. Argentina is doomed.
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Indeed, Argentina is doomed in the long run.
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