by John Tamny
Forbes
The economic consensus of the moment is that higher prices are the same as inflation, and the Fed is the only governmental entity situated to bring down higher prices. It’s a dangerous consensus. Prices are how a market economy organizes itself.
Forget for now that the Fed is not remotely capable of bending the markets to its will, and instead let’s think about what kind of tangle we’re getting ourselves into if we say inflation is higher market prices, or a higher basket of prices of the government’s choosing, only to tell the Fed to bring “inflation” down. It’s tantamount to economists and pundits ascribing to government the power to distort market signals, and by extension, the market economy. No thanks, not to mention that higher prices are not necessarily evidence of inflation as is. Please read on.
Unless economics is no longer about tradeoffs, all rising market prices pre-suppose falling prices. If you’re spending much more on eggs, by definition you have fewer dollars for other goods.