It Should Shock Us That There’s Any Consumer Price Inflation at All
Thanks to lockdowns, high unemployment, and general uncertainty and fear over covid-19, the personal saving rate in the United States in October was 13.6 percent, the highest since the mid1970s. This is down from April’s rate of 33.7 percent, which was the highest saving rate recorded since the Second World War.
Moreover, among those who received “stimulus” checks under the CARES Act, only 15% of those surveyed in an NBER study reported spending it. 33 percent said they saved the payment, and 52 percent said they used the money to pay down debt.
Taken all together, these factors should spell an immense amount of deflationary pressure, both on the money supply, and ultimately on consumer prices as well.1
Central bankers, of course, recoil at the idea of deflation, and hate the idea of Americans saving money and putting actual loanable funds—backed by savings— into the financial system. Rather, the bankers insist we all take every dime we have and spend it on entertainment and on trinkets that are perhaps best called “future landfill.”
The fact that the CPI never fell to zero in the midst of all of this—and is now headed two two percent—shows central bankers’ power to inflate.
The conclusion that central bankers and vulgar Keynesians want us to draw from tepid growth in consumer prices is that since price consumer inflation is not remarkably high, then central banks have plenty of room to further inflate the money supply in pursuit of avoiding dreaded deflation.
Consider for example, how the Fed’s chairman Jerome Powell and other central bankers speak often of inflation targets and how they conclude more credit expansion is prudent and justified so long as price indices aren’t increasing beyond some arbitrarily set “correct” rate of around two percent.
“Hey, so long as consumer prices are rising, we have nothing to worry about,” is the general refrain. Thus, central bankers assure the public it must have carte blanche to keep inflating the money supply through efforts to drive down interest rates and to directly inflate the money supply via asset purchases. In America, for example, the central bank has been monetizing the national debt since 2008. And since the Covid Crash, the Fed began monetizing even more than that as it began buying up corporate bonds in June. In spite of all of this, c
Article from Mises Wire