On “Inflation”

Inflation is ever and always a monetary phenomenon, no matter how many Keynesian myths the Fed continues to cling to.

by Rod D. Martin
June 15, 2006

A friend writes:

Sadly, a lot of consumer-oriented folks are loving this, as it is suppressing fuel prices to some extent, and a collapse would bring us back to $1.00-1.50 gasoline. Unfortunately, people wouldn't have jobs anymore, so the savings benefit from cheaper fuel would be a joke.

I'd like to see the economy cool (but not stop growing all together) without a recession. Blabbing to the news media every five minutes to show off a fed chairman's new-found stardom is hardly the way to do it. Ben is screwing up badly.

The economy does not need to "cool": that's a Keynesian myth. The Fed needs to quit fighting a phantom inflation which has nothing to do with the value or stability of the dollar. To say that rising gas prices are "inflationary" is just about as sensible as saying that dropping computer prices are deflationary: neither has anything to do with inflation or deflation at all. If both of those products were constants -- constant in demand, supply…