You Can’t Create Permanent Inflation From Artificial Growth
Much like “Humpty Dumpty,” despite the Fed’s best efforts, you can’t create permanent inflation from artificial growth.
Currently, depending on whether you are “bullish” or “bearish,” there is much angst over the prospect of higher inflation. If you are bullish, higher inflation is a reflection of surging economic growth. If you are bearish, higher inflation leads to rising costs and higher rates. However, we need a better definition of what inflation is.
“In order to understand the effects of inflation it is helpful to understand that inflation is not a general rise in prices as such, but an increase in the supply of money which then sets in motion a general increase in the prices of goods and services in terms of money.” – The Mises Institute
The chart below shows the annual percentage change of M2 money supply and CPI. As Mises sets out, the surge in M2 should lead to a rise in “prices” over the next year.
