Inflation is always and everywhere a monetary phenomenon. That has been acknowledged for a very long time, even by monetary authorities. A general increase in prices cannot occur in a stable or growing economy without an increase in the supply of money. If prices are rising for all or most products and services at the same time, it is certain that the supply of money used to buy them is increasing.
Some friends in foreign countries are complaining about the difficulties of rapidly rising prices. The thought never occurred to them that it might be because their government is creating money out of thin air, and that the new dilutes the value of the already-existing money. Each unit is worth less and can buy less food, clothing, or anything else as it is deliberately devalued.
In less developed countries, with cash societies, relatively small financial sectors, and less complexity, as more currency is created by central bank printing presses, the general price levels increase. In highly developed economies, the mechanism is much more complicated, especially one for which a significant amount of its currency is held by foreign entities. A rise in the money supply will not necessarily yield a direct increase in the consumer price level.
Promoters of monetary manipulation of the economy can point to significant increases in the supply of money that did not yield a significant increase in the general price level. They use that as a refutation of the premise that inflation of the money supply causes price inflation. The real question, however, is whether consumer price inflation is the only thing that matters, or even the most important thing.
The Federal Reserve Bank has set as its objectives maximum employment, stable prices, and moderate long-term interest rates. In spite of the economic bubbles and busts, and the ravages to the economy that they cause, monetary authorities pat themselves on the back, saying that at least they have kept prices stable. Given a 3% annual inflation rate,
the dollar loses a third of its value every decade. That cannot be called stability in any real sense. It is stable only in relation to even more irresponsible countries.
Beside the consistent devaluation that disproportionately hurts the poor and those on fixed incomes, however, there are more severe results of economic manipulation using the money supply. Bubble markets are, by definition, those that have rapid inflation in prices. The stock market bubble in the 1990s and the real estate and financial bubbles of the 2000s saw prices skyrocket. Those multi-trillion dollar markets are a very large part of the economy. Those assets are purchased with dollars, the same dollars that are used to buy a head of lettuce. Given that fact, it is unreasonable to say that the inflation rate was low during the bubble years. The inflation just occurred in non-consumer sectors. The inflation of the central bank is multiplied through fractional reserve lending at the banks, magnifying the effect.
The result of that inflation is, in fact, as bad consumer price inflation. The low interest, easy money, inflationary policies create tremendous distortions. A bubble market necessarily has to burst at some point. That burst destroys real wealth that was misallocated, destroys jobs, and necessitates painful economic readjustment. It is apparent that the central bank fails in every one of its objectives. By destabilizing the economy with artificially low interest rates and excessive money creation, it has created unemployment and economic pain. This is the other face of inflation that remains hidden behind a veil of complexity, but one that is just as ugly as publicly-acknowledged face.
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