The Blame Game – OpEd – Eurasia Review

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After months of outright denials and fiery persistence that inflation is not an issue and never will be, central bankers in the US, EU and other advanced economies are now forced to do in the face of reality, as well as the consequences of their own actions. Instead, however, they teamed up with their peers in politics and together they embarked on a campaign to disperse and deflect blame and avoid accountability altogether.

For months now, the prices of basic commodities and basic necessities have risen sharply and households in most major economies are feeling increasing pressure on their budgets. From food prices to skyrocketing gas bills, the evidence is clear and you don’t need to be an economist to understand what’s going on. By now, it is evident to the average citizen and taxpayer that, contrary to the assurances of their political and institutional leaders, inflation is here and it is here to stay. What’s much more murky and nuanced, however, is who is to blame for it.

If one took at face value the explanations of politicians and central bankers, it would appear that the inflationary pressures we are experiencing today are the direct result of the market players themselves. The unprecedented fiscal and monetary policy excesses that we have experienced over the past year and a half have absolutely nothing to do with this. Instead, it is all due to the greed of supply, i.e. the exploitative and profit instincts of evil capitalists, and the childish behavior of demand, i.e. the inability of the average consumer to manage their money the way they are supposed to and resist the urge to spend it all at once. This is the gist of the rhetoric being pushed by senior officials at the Fed, the ECB and other major central banks, and it is an explanation that is also enthusiastically supported by the political establishment.

This reaction is quite understandable from a political point of view. For central bankers, it is essential to blame it elsewhere, lest they lose all credibility. After all, only a few months ago, they were still insisting that inflation does not exist, or even if it does, it is only “transient”, and anyone worried that their massive impression money could eventually lead to a price hike is an ignorant alarmist. As for the political class, the reasons for adopting this narrative are even simpler: Throughout Western history, you would be hard pressed to find a leader who politically survived a period of inflation. The last thing a government wants is to remember the one that managed to trigger an inflationary tidal wave that will destroy whatever is left in the real economy after the damage already inflicted by lockdowns and forced closures.

Nonetheless, despite what central planners may wish to be true and the version of events they strive to promote to the public, the nature of reality remains unchanged. The basic principle of cause and effect, basic economic laws, and simple common sense are all in stark contrast to current mainstream discourse. Inflation occurs when there is a significant increase in the amount of money for the same goods. It’s that simple, always has been and always will be. Every historical case of inflation and hyperinflation involved an increase in the money supply and this case today is no different. If anything, given the extraordinary interventions, seemingly limitless money printing and MMT-inspired spending spree we saw during the Covid crisis, the inflationary era we are now entering is a classic example. of this phenomenon and if there is something a little surprising about it, it is that it did not come sooner.

Of course, for those of us who have watched this space closely for a long time, it was already clear even before the virus emerged that inflationary pressures had been at work for years. They didn’t manifest in the price of a gallon of milk or a quadrupled electric bill, but they pushed asset prices to absurd levels and utterly worthless companies found themselves valued at levels that just didn’t make sense. This time, however, inflation should have a much more pronounced and consequent impact.

Besides its obvious direct effects on the finances of the average citizen, it also has the potential to trigger much broader change, politically and socially. In the aftermath of the covid crisis, the unimaginable economic devastation of the various “containment” policies and the socio-political schism they have created in most societies, public confidence is already deeply eroded. Adding significant and prolonged financial hardship to this mix could have serious ramifications. This is particularly relevant for gold investors. Seeing inflation set in was hardly surprising to those who held physical gold and were aware of the inevitable consequences of fiscal and monetary recklessness. Physical precious metals are, of course, the best way to protect against the diminishing purchasing power of fiat money, but they are also extremely reliable safe havens during times of uncertainty and more generalized unrest, a much like the one we might soon be faced with.

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