While Household Income Falls, Central Bankers Are Pushing for Higher Prices
Central banks continue to be obsessed with inflation. Current monetary policy is like the behaviour of a reckless driver running at 200 miles per hour, looking at the rear-view mirror and thinking “we have not crashed yet, let’s accelerate”.
Central banks believe that there is no risk in current monetary policy based on two wrong ideas: 1) That there is no inflation, according to them, and 2) that benefits outstrip risks.
The idea that there is no inflation is untrue. There is plenty inflation in the goods and services that consumers really demand and use. Official CPI (consumer price index) is artificially kept low by oil, tourism and technology, disguising rises in healthcare, rent and housing, education, insurance and fresh food that are significantly higher than nominal wages and official CPI indicates. Furthermore, in countries with aggressive taxation of energy, the negative impact on CPI of oil and gas prices is not seen at all in consumers’ real electricity and gas bills.
A recent study by Alberto Cavallo shows how official inflation is not reflecting the changes in consumption patterns, and concludes that real inflation is more than double the official level in the Covid-19-era average basket and also, according to an article by James Mackintosh in the Wall Street Journal, prices are rising to up to three times the rate of official CPI for things people need in the pandemic, even if the overall infla
Article from Mises Wire