Deeper Roots of Today’s Inflationary Policies
The pre-1971 history proves beyond a shadow of doubt that you don’t need a fixed rate of inflation to enable economic growth, as today’s central bankers and their Wall Street acolytes endlessly insist. And it also reminds us that there is not some innate tendency for the currency to relentlessly depreciate.
Today’s 2% inflation mantra was constructed from the erroneous research by Milton Friedman and his disciple, Ben Bernanke, based on the period before WWII. They studied the Depression years after 1929 and basically concluded that we need inflation to avoid any possible similar deflation period. But they failed to look at the crucial 15-year period preceding the Great Depression.
What happened was this.
In November 1914, the Fed opened for business and was then promptly drafted to finance America’s ill-fated entry into World War I (WWI).
The effect of massive money printing to finance the war was a 51% depreciation of the dollar’s purchasing power by the crest of the post-WWI inflation in June 1920.
Governments had sold war bonds to both their investor class and average citizens alike, promising that they would be redeemed after the end of hostilities at the pre-war gold pari
Article from LewRockwell