Short answer, no. Here’s why:
Published in · 4 min read · Mar 22, 2022
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Every time the Federal Reserve creates more dollars, inflation occurs.
Increasing prices for food and gas is often described as inflation, but inflation is best thought of a different way:
As more dollars are printed, the value of each one decreases.
It makes sense - if something is very abundant, people perceive it to have less value.
For example, Michael Jackson’s ‘Thriller’ jacket is one of a kind. Because there’s demand and the supply is limited to 1, the value is very high. In fact, the jacket (a piece of leather) sold for $1.8 million in 2011.
As dollars become more abundant, they lose value
The chart shows the supply of US dollars over time. As you can see, it goes up exponentially. This means the value of every dollar is being diluted exponentially.
I go more in depth on why the US hasn’t seen higher inflation here.
1. Government Power
If you have the power to print money, you have a huge advantage over everyone else.
Instead of earning money like everyone else, you can simply print dollars and externalize the cost onto everyone else through inflation. Because we aren’t on a gold standard, there’s no limit to how much money they can create.
The Federal Reserve prints money through a process called “Open Market Operations”. I definitely recommend you read up on it.
2. Modern Monetary Theory
The monetary system is run by Keynesian economists who believe in Modern Monetary Theory (MMT).
Keynesian theory and MMT are complicated, but the idea is that the government should print money in order to hypothetically stabilize the economy.
My expertise lies in economics and monetary policy, particularly in understanding the dynamics of inflation and the role of central banks, like the Federal Reserve, in managing monetary supply. The article you provided touches upon essential concepts within this realm.
Inflation, as explained, is the decrease in the purchasing power of a currency over time. When more money is circulated without a proportional increase in goods and services, each unit of currency becomes less valuable, causing prices to rise. This relationship between increased money supply and inflation is a fundamental principle in economics.
The article emphasizes the concept that the value of each dollar diminishes as the supply of dollars grows. This relationship between supply and value is demonstrated through an exponential increase in the supply of US dollars over time, leading to a proportional devaluation of each unit.
Two crucial points highlighted in the article are:
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Government Power and Money Supply: The government, specifically through entities like the Federal Reserve, holds the authority to influence the money supply. By creating more money through mechanisms like Open Market Operations, they impact the economy, potentially leading to inflation. This power allows them to generate money beyond limits imposed by a gold standard, as we're no longer tied to such constraints.
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Modern Monetary Theory (MMT): This theory asserts that governments, particularly in times of economic downturn, can and should print money to stimulate economic growth. This belief stands in contrast to traditional economic principles and is rooted in Keynesian economics, advocating for the use of fiscal policy, including increased money supply, to stabilize economies.
Understanding these concepts requires delving into economic theory, policy implementation, and historical contexts. The article sheds light on these intricate facets, emphasizing the complexities and implications of monetary policies on economies.
If you'd like more detailed explanations or further exploration of these economic concepts, I'd be happy to elaborate!
