Inflation Is Great If You’re Already Rich

Written by Doug French

he 4.2 percent Consumer Price Index (CPI) bounce for April sent a chill through some traders and financial commentators who had expected a tamer number like a 3.6 or 3.9 percent from last year’s covid price level air pocket. 

The MarketWatch headline screamed, “U.S. Inflation Soars in April to Thirteen-Year High, CPI Shows, and Reveals Fresh Stress on the Economy.” Barron’s was slightly more relaxed: “Surging Inflation Is Hammering the Stock Market. Why It Isn’t Time to Panic Just Yet.” Then there was Nobel laureate Paul Krugman, who tweeted, “So, the inflation report wasn’t a nothingburger, but it was sort of a White Castle slider—not a very big deal.”

Before the 4.2 percent print, John Authers posted a piece on Bloomberg, “Markets Give Powell a Break. It May Be Transitory.” “It” being CPI. “Transitory” being a term Powell uses often, a.k.a., “don’t worry, be happy, this too will pass.” 

With all of this teeth gnashing over CPI and money supply, Nobelist Krugman offered up what he calls “Krugman Wonks Out: Return of the Monetary Cockroaches,” where he says, “[C]ockroach ideas, false beliefs that sometimes go away for a while but always come back.” The false belief according to him is that increases in the supply of money lead to inflation, meaning price inflation.

We must remember what Ludwig von Mises wrote, “What people today call inflation is not inflation, i.e., the increase in the quantity of money and money substitutes, but the general rise in commodity prices and wage rates which is the inevitable consequence of inflation. This semantic innovation is by no means harmless.”

So while Chairman Powell claims to be adhering to the Fed’s mandate of stable prices, stable prices in a world with the division of labor and technology running step for step like Affirmed and Alydar in the 1978 Belmont Stakes, prices should be falling, making everyone, especially those at the bottom of the economic food chain better off.

Tragically, Powell sees it another way. Reuters reported the Fed chair as saying that “low inflation hurts American businesses and households and constrains the Fed’s ability to offset economic shocks with easy monetary policy.” Nothing could be further from the truth.

Professor Jörg Guido Hülsmann wrote in Deflation and Liberty,

In a word: the dangers of deflation are chimerical, but its charms are very real. There is absolutely no reason to be concerned about the economic effects of deflation—unless one equates the welfare of the nation with the welfare of its false elites. There are by contrast many reasons to be concerned about both the economic and political consequences of the only alternative to deflation, namely, re-inflation—which is of course nothing but inflation pure and simple.

Given the retirement of the Contra Krugman team of Tom Woods and Bob Murphy, I’m left to point out that what Krugman can’t see must not be. Where’s the hyperinflation, you zombies and monetary cockroaches? He said we cried wolf ten years ago and are doing it again.

Now, he fingers the crypto crowd for the money-printing panic. He claims to be patient, but those who seek escape from the government’s currency and are arguing “[f]iat money is doomed because the Fed won’t stop running the printing press” are wrong, he says, because “nothing like that has happened in the U.S.”

But it has happened and is happening. Murray Rothbard explained, “[A]n increase in the money supply can only dilute the effectiveness of each existing money unit, and therefore must be “inflationary” in the sense of raising prices beyond what they would have been otherwise.”

“What they would have been otherwise” being the key. Were the Weimar Republic or recently Zimbabwe or today’s Venezuela sophisticated economies ripe with technology and the division of labor, creating efficiencies and pushing down prices? No. Those governments printed money, and their people had nowhere to escape the falling currency but by buying up consumer goods, creating shortages, clearing shelves, and forcing up prices until their entire economies fell apart.

Everyone has seen pictures of empty shelves in Venezuela. Meantime, the one-year return on the Caracas stock exchange is 1,804.92 percent according to Bloomberg.

Venezuela’s well-to-do survive and possibly thrive, while the poor starve. And, for Nobel laureates and Fed chairmen that’s just fine.

The US has inflation. It benefits the rich, at the expense of the poor.

“Inflation is the true opium of the people and it is administered to them by anticapitalist governments and parties,” wrote Mises.

What Krugman can’t see is that people are escaping the Fed’s money creation by buying stocks, bonds, real estate, crypto, NFTs, and who knows what all. While it might not be hyper, yet, the Fed is providing an overdose of what Mises called true opium.

Why Marxist Organizations Like BLM Seek to Dismantle the “Western Nuclear Family”

By Bradley Thomas

One of the most oft-cited and criticized goals of the Black Lives Matter organization is its stated desire to abolish the family as we know it. Specifically, BLM’s official website states:

We disrupt the Western-prescribed nuclear family structure requirement by supporting each other as extended families and “villages” that collectively care for one another, especially our children, to the degree that mothers, parents, and children are comfortable.

This idea isn’t unique to BLM, of course. “Disrupting” the “nuclear family” is a commonly stated goal among Maxist organizations. Given that BLM’s founders have specifically claimed to be “trained Marxists,” we should not be surprised that the organization’s leadership has embraced a Marxian view of the family.

But where does this hostility toward the family originate? Partly, it comes from the theories of Marx and Engels themselves, and their views that an earlier, matriarchal version of the family rejected private property as an organizing principle of society. It was only later that this older tribal model of the family gave way to the modern “patriarchal” family, which promotes and sustains private property.

Clearly, in the Marxian view, this “new” type of family must be opposed, since the destruction of this family model will make it easier to abolish private property as well.

Early Family Units in Tribal Life
Frederick Engels’s 1884 book The Origin of the Family, Private Property and the State provides a historical perspective of the Marxian view of the development of the modern Western family unit and its relation to property rights. (Engels, of course, was the longtime benefactor of and collaborator with Marx.)

In reconstructing the origins of the family within a Marxian framework, Engels traces back to the “savage” primeval stage of humanity that, according to his research, revealed a condition in which “unrestricted sexual intercourse existed within a tribe, so that every woman belonged to every man, and vice versa.”

Under such conditions, Engels explained, “it is uncertain who is the father of the child, but certain, who is its mother.” Only female lineage could be acknowledged. “[B]eing the only well known parents of younger generations,” Engels explained, women as mothers “received a high tribute of respect and deference, amounting to a complete women’s rule [gynaicocracy].”

Furthermore, Engels wrote, tribes were subdivided into smaller groups called “gentes,” a primitive form of an extended family of sorts.

These gens were consanguineous (i.e., included people descended from the same ancestor) on the mother’s side, within which intermarrying was strictly forbidden. “The men of certain ‘gens,’ therefore, could choose their wives within the tribe, and did so as a rule, but had to choose them outside of their ‘gens,’” Engels explained. And “marriage” at this stage was a “communal” affair, meaning that multiple partnerships between men and women was closer to the rule than the exception.

Because mothers were the only parents who could be determined with certainty, and the smaller gentes were arranged around the mother’s relatives, early family units were very maternal in nature and maternal law regarding rights and duties for childrearing and inheritance were the custom.

Transition to the “Pairing Family”
This was the state of affairs for thousands of years, according to Engels. Over time, however, there emerged what Engels referred to as the “pairing family,” in which “A man had his principal wife…among many women, and he was to her the principal husband among others.” This was in no small part due to the “gentes” within tribes developing more and more classes of relatives not allowed to marry one another. Due to these increasing restrictions, group marriage became increasingly impossible and ever more replaced by the pairing family structure.

Under this structure, however, the role of mothers was still dominant. Quoting Arthur Wright, a missionary among the Seneca Iroquois tribe, Engels notes, “The female part generally ruled the house….The women were the dominating power in the clans [gentes] and everywhere else.”

The fact that women all belonged to the same gens, while husbands came from separate gentes “was the cause and foundation of the general and widespread supremacy of women in primeval times,” Engels wrote.

“In the ancient communistic household comprising many married couples and their children, the administration of the household entrusted to women was just as much a public function, a socially necessary industry, as the procuring of food by men,” he added.

As society evolved, as Engels described it, from “savagery” to “barbarism,” an important evolution was man’s development of weapons and knowledge that enabled them to better domesticate and breed animals.

Cattle and livestock became a source of wealth, a store of milk and meat. “But who was the owner of this new wealth?” asked Engels. “Doubtless it was originally the gens,” he answered, referring to a collective, or group ownership over the sources of wealth. “However, private ownership of flocks must have had an early beginning.”

“Procuring the means of existence had always been the man’s business. The tools of production were manufactured and owned by him. The herds were the new tools of production, and their taming and tending was his work. Hence he owned the cattle and the commodities and slaves obtained in exchange for them,” Engels explained. This transition marked an early passage from “collective” property to “private” ownership over property—particularly property in productive resources.

Such a transformation, Engels noted, “brought about a revolution in the family.”

Part of that revolution involved a shift in the power dynamics of the household.

“All the surplus now resulting from production fell to the share of the man. The woman shared in its fruition, but she could not claim its ownership,” wrote Engels.

The domestic status of the woman in the house, which had previously involved control and distribution of the means of sustenance, had been reversed.

“Man’s advent to practical supremacy in the household marked the removal to his universal supremacy,” and further ushered in “the gradual transition from the pairing family to the monogamic family” (what we would consider the nuclear family).

With the superior status acquired, Engels wrote, men were able to overthrow the maternal right to inheritance, a move he described as “the historic defeat of the female sex.”

The family unit’s transition to a male-centered patriarchy was complete, according to Engels. Much of the blame for this can be attributed to the emergence of private property and men’s claim over it.

How to Overcome the Patriarchy?
In the Marxian view, therefore, the modern nuclear family runs counter to the ancient “communistic” household Engels had earlier described. It is patriarchal and centered on private property.

“In the great majority of cases the man has to earn a living and to support his family, at least among the possessing classes. He thereby obtains a superior position that has no need of any legal special privilege. In the family, he is the bourgeois, the woman represents the proletariat.” The family unit, rather than the collective tribe, had become the “industrial unit of society.”

The overthrow of this patriarchic dominance can only come, according to Engels, by abolishing private property in the means of production—which he and those steeped in Marxist ideology blame for the patriarchy.

“The impending [communist] revolution will reduce this whole care of inheritance to a minimum by changing at least the overwhelming part of permanent and inheritable wealth – the means of production – into social property,” he concluded.

What would this new social arrangement look like, according to Engels?

The care and education of children becomes a public matter. Society cares equally well for all children, legal or illegal. This removes the care about the “consequences” which now forms the essential social factor – moral and economic – hindering a girl to surrender unconditionally to the beloved man.

In this we see early echoes of the modern left’s current refrain attacking “patriarchy” and the nuclear family as essentially capitalist and private property–based institutions.

In this, BLM is no different from other Marxist groups. The organization’s goals extend far beyond police abuse and police brutality. The ultimate goal is the abolition of a society based upon private property in the means of production.

Read the rest here…

Gold: The Protection Against Inflation?

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods.”—Alan Greenspan “Gold and Economic Freedom

As I scan the various media outlets and listen to the financial experts discuss personal finance; the message is similar. The message of needing to beat inflation is a common theme. While on the surface this seems to be a sage and insightful thing to address, however, one must understand why inflation occurs in order to beat it.

When the monetary base is expanded, via the central bank, it is done mainly based upon deficit spending by the central government. The central government deficit spending occurs due to the fictional the tax revenues are unable to meet the expenses for a certain budgetary time period. When this short fall occurs, the central bank purchases government securities, primarily debt instruments, which gives the central government the cash to balance the budget. Over time, this process expands the money supply and causing inflation. Of course, the interest on the deb continues to grow, adding more of an expense to the citizens.

How does gold factor into this model? How is gold the solution in mitigating the effects of inflation? The answer can be found from an essay written by Alan Greenspan “Gold and Economic Freedom”(1966). The use of gold, as a medium of exchange, helps reduce the impact of governments overspending.Read more here: https://www.constitution.org/mon/greenspan_gold.htm

A Wealth Tax Consumes Capital

It seems one cannot make a name for one’s self on the Left, unless one has a proposal to tax wealth. Academics like Tomas Piketty have proposed it. And now the Democratic candidates for president in the US propose it too, while Jeremy Corbyn proposes it in the UK. Venezuela finally added a wealth tax in July.

So how does a wealth tax work? The politicians quibble among themselves, as if the little implementation details that differ between them are important. But they share the key idea. The wealth taxman is to go to the people who have wealth, and take some. And next year, come back and take more. And so on.

It should be obvious that this is morally wrong. But we want to focus on the economics. To do that, we need to drill down into the nature of wealth. What is wealth?  Read the rest here:

https://www.cobdencentre.org/2019/10/a-wealth-tax-consumes-capital/

WeWork’s IPO Disaster and the Problem of Easy Money

One of the most spectacular events in the startup world this year was the collapse of The We Company IPO. Originally WeWork, We is a company that is, essentially, a gigantic sublessor. Started in 2010 by Adam Neumann, the vision of We was to provide collaborative short-term leases to companies. Later, it would branch out into gyms, schools, and apartment rentals. Along the way, the company attracted investors to the tune of billions, such as SoftBank’s $9 billion stake. The company was set to go public this year with an expected market valuation of $47 billion. This sky-high valuation was based on the fact that We managed to define itself as a technology company. To this day, no one is quite sure what technology was actually offered. Read more here:

Pittsburgh Tribune-Review: “Pro-free trade, not pro-business” – Cafe Hayek

Pittsburgh Tribune-Review: “Pro-free trade, not pro-business” – Cafe Hayek:

TweetIn my December 27th, 2005, column for the Pittsburgh Tribune-Review I emphasized the reality that to endorse free markets is emphatically not to be “pro-business.” (Of course, nor is it to be anti-business.) You can read the column below the fold. (For some reason, all but two of my Trib columns from late December 2005 […]