The result of the Federal Reserve’s increase in the money supply, which pushes interest rates below that market-balancing point, is an emerging price inﬂation and an initial investment boom, both of which are unsustainable in the long run.
The CPI vs. the Diversity of Real People’s Choices
A central tool for governments to maintain their authority in society and their control over people’s lives is the ability to make the citizenry accept and use their monopoly medium of exchange.
Most people assume that prices move as a result of changes in the money supply. Instead, let’s look at the effect of changes in interest.
The real long-run goal of monetary reform should be the denationalization of money. That is, the separation of money from the state by ending of central banking, altogether. In its place would emerge private, competitive free banking – a truly market-based money and banking system.
Free bankers have been fighting a war on two fronts. On one they face champions of central banking and managed money. On the other they struggle against advocates of 100-percent reserve banking. Although the second front is a lot smaller than the first, it’s far from being unimportant, in part because the battle there is being fought against people who generally favor free markets, who might have been expected to join rather than to oppose our cause.
Scott Sumner said he had a “modest” proposal: there should be a highly liquid futures market in Nominal Gross Domestic Product (NGDP). Let’s look at that.