May 25, 2016—For the latest episode of the Lara-Murphy Reporting show, the podcast that analyzes financial markets from the perspective of Austrian economics, economist and author Robert Murphy talks to L. Carlos Lara, the CEO of United Services and Trust Corporation, about how the Federal Reserve’s habit of purchasing Treasury debt is like Caesar’s trick, which is the act of debasing the money to cover budge shortfalls.
According to Murphy, “governments use inflation to fleece the public,” a problem that is dissected by the two Austrian economists in the podcast.
Here are some interesting quotes from the conversation:
“When governments debase the money, it gives them more purchasing power in the short term, but then when the community responds to it, prices in general rise. So you see how inflating the money supply ends up leading to a rise in prices. … Nowadays when people use the word inflation, they probably mean a rise in prices. Whereas historically, a lot of economists used the term to focus on inflating the quantity of money or credit. The two are obviously related. Other things equal, if the money supply increases, prices go up.”
“We sorta all know there’s been an enormous amount of money created obviously, but you have to use your imagination here in that, it’s not like all of a sudden the economy is flooded with paper dollar bills. Truly, what the Federal Reserve publication is saying is that it’s done through credit. And credit flows through the commercial banking system, when they grant loans and issue loans, you see. So … the money supply is increased through credit, via expansion of credit.”
Should Americans be better educated on how government imposes a hidden tax on the poor with inflation? Share your thoughts with us!