Calm Down About Inflation, etc.
The Inflation Alarmists
Because I’m a libertarian, I’m periodically exposed to a quirky part of the libertarian movement that is preoccupied with monetary policy. These people obsessively complain about inflation, e.g., quoting statistics like “since such-and-such year [a long time ago], the dollar has lost 97% of its value!” (You’re supposed to be alarmed by that.) They passionately call for auditing the Federal Reserve, or even ending the Fed (recall Ron Paul’s weirder campaign messages). Some want us to go back to the gold standard; they think it’s a horrible problem that our money isn’t backed by anything. They complain about the government spending too much money (as in Biden’s recent mammoth spending bill) – but the main problem they see with this isn’t what most normal people would say. E.g., these weird libertarians don’t say, “We’re putting a huge burden on future generations who have to pay this back, with interest.” Rather, they complain that it’s going to cause the Fed to print more money, and that’s going to cause inflation. Which is apparently the worst thing they can imagine.
I confess, I once worried about inflation too – back in the 2008-9 recession, when the Fed drastically increased the money supply. But the hyper-inflation never came. (Why it didn’t happen is an interesting question, but we won’t go into that now.)
There was serious inflation once in my life. It was around 1980, when I was a child. Then the Federal Reserve clamped down on the money supply and stopped it. I bet there have been libertarians crying “inflation” every year since then, and it never happens. More precisely, we have maintained a reasonably steady, low inflation rate for about the last forty years. I have long since stopped worrying about inflation. But some people never get tired of warning about the dangers of inflation.
So my question: What the heck is up with you guys?
Seriously, I have no idea why the low, steady inflation the U.S. has seen for forty years is a problem. I guess it’s a problem if you were storing a bunch of cash in your mattress for the last 40 years. Lesson: Don’t keep your life savings in your mattress.
Anyway, worries about serious inflation are increasing right about now. Pundits on Fox News are getting into it, trying to alarm viewers about the price rises. They do this by quoting statistics on a few commodities, like lumber and gasoline. When I hear stuff like this, I go look up the actual inflation rate. Here’s the monthly inflation for the past 16 months (https://inflationdata.com/Inflation/Inflation_Rate/Monthly_Inflation.aspx):
The last 4 months are in fact higher than normal, so we could be in for some above-average inflation for a while. But I wouldn't freak out about it; it's not like we're at 1970's level rates. (But I reserve the right to freak out in a few months if the rise continues, or if we don't see people returning to work. See the employment statistics: https://www.statista.com/statistics/269959/employment-in-the-united-states/.)
I don’t know why the Inflation Alarmists hate the Fed, either. I mean, sure, I’m down with privatizing the money supply, along with everything else. (Hurray for BTC!) But frankly, if we were going to make a list of dysfunctional government (or quasi-government) agencies, the Fed really would not make my short list. I think the Fed might be among the least dysfunctional, corrupt, or incompetent (quasi-)governmental agencies that I can think of. We have other arms of government blowing up people, locking hundreds of thousands of innocent people in cages, stealing trillions of dollars, and these libertarians are worrying about an institution creating a 3% inflation rate?
I know, "Inflation is stealing value from all of us!" But geez, the government is directly stealing >3 trillion a year, so why is the Fed such a big deal?
And by the way, do you really want Congress to get more involved in controlling the Fed? Congress -- you think those are the guys to trust with the money supply? Because that’s the effect of calling on Congress to audit the Fed or do more oversight of the Fed.
Unemployment Alarmists
The situation kind of reminds me of my ‘debate’ with Andrew Yang. I was at a panel discussion on universal basic income in Utah. (https://www.facebook.com/mike.huemer/posts/10157823954854115) Andrew Yang appeared by video link and defended his universal basic income proposal.
The foundation of it was his prediction that we would soon be seeing massive, technological unemployment – because of more robots and computer systems, there just wouldn’t be work for people anymore. Hence, we’d need to give people a different income stream. This was back in 2018.
So while he was talking, I went on the internet and just looked up the unemployment statistics. I found that we were, at the very moment that Yang was warning in dire terms about the threat of unemployment, experiencing the lowest unemployment rate in something like 50 years. I told him this (I recall starting my speech with something like, “I think all of that was the exact opposite of the truth”). But Yang didn’t seem to care.
He also appeared to me to have something of a magical view of the economy – as if you can just shuffle money around, and somehow there will be more of it in the end. I tried to explain that you can only “give people money” by taking that money from someone else, so you’re not creating more money. Unless you have the Fed print more money, but that just reduces the value of the existing dollars by an equal proportion, so there’s no free lunch. I don’t think he got it. Nice guy, but really not an economic expert.
My inner monologue was something like: “Wtf, why is this guy trying to get us all alarmed about unemployment when we’re at record lows? Did he even look at the statistics before coming to give this speech? Does he know that there’s such a thing as ‘unemployment statistics’??”
Similarly, when I hear the inflation alarmists, I think, “Why are these guys trying to get me alarmed about something that, over the past four decades, has been about as well-controlled here as anywhere in the world? Do they know about inflation statistics?”
Everything Else
Actually, humans have a widespread tendency toward alarmism about … whatever we can think of. Often, there are people trying to get you to panic about a problem that’s at its lowest point in decades, or even centuries. E.g., people living in one of the most egalitarian, least prejudiced societies in history, obsessively finding threats of racism, sexism, etc., all around us. I leave it to the reader to find other examples.
I guess the conclusion is: The need for drama trumps empirical facts. You just choose your preferred threat, and then find reasons for getting excited about it.