Right now, we’re hearing lots of chatter from the commentariat about how the Federal Reserve is now going to charge in and fight inflation.
As John Tamny explains in this column, we should scoff at the idea.
He writes, “The notion implies that without the Fed’s responsible ways, the alleged inflation crisis would spiral out of control. Such a view is obnoxious, and that’s being gracious. Governments cause inflation. Always. In the market-driven world of lending, the response to actual inflation is always going to be swift, and for obvious reasons. No one wants to lend out more than they get back, from which in a natural free market rates of interest would naturally rise as compensation for any devaluation. It’s a long or short way of saying that Fed fiddling with short-term rates to slay inflation is the ultimate non sequitur.”
And no, fiddling with interest rates won’t accomplish much.
Read the whole thing.