Fallacies in the Inflationists’ Argument

by Rick Ackerman

Like nearly all who have argued the case for inflation/hyperinflation in this forum, “Mary,” who posted here last week, failed to describe a plausible mechanism to make it happen. Like so many others before her, her argument rests on the assumption that the Fed can simply ‘gun the money supply’ to produce a desired quantity of inflation at any time. If it were that easy, one might ask, then why haven’t Japan’s and Europe’s desperate attempts to do so failed to stimulate any inflation whatsoever — other than in the price of homes, stocks and sovereign bonds? Below is my response to Mary’s post, which can be read in its entirety by clicking here.

(Hyper)inflationists never like to discuss the nitty-gritty details of how it could happen, Mary. They seem to think they can win arguments by throwing around vague phrases like ‘gunning the money supply.’ But what, really, is this supposed to mean? Central-bank stimulus to date amounts to perhaps $20-$30 trillion, but the only inflation it has created is in the housing market, stocks and bonds, which are all vulnerable to a collapse — i.e., deflation — at any time.

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