Breaking It Down-Inflation: Systems/Models Inside

"The natural tendency of the state is inflation." Murray Rothbard

Inflation Basics: What’s the Deal?

• Inflation Defined:
  Originally, inflation meant an expansion of money and credit, simple. Over time, the focus shifted to what inflation causes: higher prices. That’s a neat trick because it keeps the blame off the real culprit: the Fed.

• The Root Cause:
  When the money supply grows faster than the goods and services in the economy, the value of money drops. Prices rise, but the true problem isn’t beef costing more, it’s the flood of dollars in circulation

  

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The Hidden Game: Why It Matters

• I’m Not A Keynes Fan But He Nailed It:
  Inflation isn’t just about prices going up, it’s about wealth being shuffled around. As John Maynard Keynes put it:

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

• Inflation destabilizes everything. It’s not just economic; it’s psychological. Confidence gets wrecked, wealth turns into a lottery, and the economy? It starts to crumble.

• Winners and Losers:

  • Winners: Those holding assets like stocks and real estate, where the Fed’s printed money often lands.

  • Losers: Everyday folks paying more for food, gas, and rent while their savings lose value.

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The Inflation Lie

• The Media Spin:
  Inflation is framed as “prices going up.” What they don’t talk about? Asset bubbles. Stocks, real estate, and other markets soar because of money printing—but that’s painted as “economic strength.”

• What Really Drives Inflation:
  Forget “cost push” or “demand pull.” These are distractions. The core driver? Expanding the money supply (M1, M2, M3). No printing? No inflation.

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CPI: The Federal Reserve’s Smoke and Mirrors

• The CPI Isn’t What You Think:
  The Consumer Price Index isn’t a simple “cost of living” gauge. Even the Bureau of Labor Statistics admits it’s about measuring “satisfaction.”

• How They Fudge the Numbers:

  • Substitution Games: Steak too pricey? You’ll buy pork. Pork too expensive? Hello, beans. They call this “maintaining satisfaction.”

  • Quality Adjustments: Your car costs more, but it gets better gas mileage? They count that as a price decrease.

• The Result:
  CPI understates the real impact of inflation, making the Fed look like it has things under control while your paycheck buys less and less.

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The Fed: Hero or Villain?

• Pre-Fed America (1854–1913):

  • Economy in recession: 45% of the time.

  • Inflation: Practically zero (0.12% annual). Prices were stable over decades.

• Fed Era (1913–2020):

  • Economy in recession: 20% of the time.

  • Inflation: 3.08% annual. Prices exploded 2,275% higher than they would have at pre-Fed rates.

• The Trade-Off:
  The Fed reduced recessions and gave us longer growth cycles, but at what cost? Your dollars lose value every single year.

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Today’s Inflation: A Reality Check

• The Big Picture:

  • Money supply up over 20% year-over-year.

  • Prices may plateau temporarily, but they’ll surge again.

• Why Prices Keep Rising:

  • Businesses hoard goods instead of producing more.

  • Companies speculate on stock prices, not factories.

  • Real investment slows because inflation makes profits harder to predict.

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The Bottom Line

Inflation isn’t just an economic stat, it’s a system designed to take from some and give to others. It is a hidden tax.

The more money the Fed prints, the less yours is worth.

The only question: Are we paying too high a price for the Fed’s so called stability?

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