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Tuesday, June 21, 2016

Part I. Why Were Libertarians All Wrong About Inflation?

By: Wes Messamore
The Humble Libertarian
June 21, 2016

My libertarian friends,

We were all so sure we were right. Like we were smug as could be about how sure we were right about hyper inflation.

Our kindred of mind had called it right so many times before on both monetary and military policy, against the overwhelming disagreement of the uncritical, less curious masses.

Hayek had the boom and bust cycle figured out.

Ron Paul nailed it so many times, we were sure he has to be some kind of prophet or something.

So where's all the hyperinflation we've been talking about since the last major war in 2003 and all the monetary expansion starting in 2008? Anyone else notice it didn't happen?

Here's my Facebook feed today:

^^Haha, look how smug I was. #winflation

I know a lot of you shared that level of certainty with me, so the lack of hyperinflation going on right now is glaring in light of this reminder of where a lot of us were at four years ago.

Here's where Gold was when I went to buy a bunch of it in June 2012, hovering around $1600 USD per ounce:

Now watch what happened:

(Thanks, Kitco for the graphs.)

Four years later, we're below $1300 per ounce.

Despite the $2.4 trillion war in Iraq.

(The Congressional Budget Office says it cost each of America's 141 million taxpayers $17,000. Now let me ask you, how would have $17,000 dollars right now improve your life?)

Even more hard to comprehend is this is what's going on despite the Adjusted Monetary Base (how much money der is out der) increasing by a factor of 5(!!!) since 2008.

(Thank you, Federal Reserve Bank of St. Louis for the graph. And also #*@! you.)

Now I don't know about you, but I haven't heard about any record-shattering gold discoveries of some mother lode of gold out there somewhere, have you? Has the supply of gold doubled since 2012 like the monetary base has?

So the question of the day year, that libertarians absolutely have to answer for themselves, is what the H- E- double hockey sticks is going on out there that we didn't see coming?

All that powerful upward pressure on US dollar prices is not showing up at the check out counter, at the gas station, in the gold markets. Was Hayek wrong?

You and I both know how sound his understanding of markets was, and the impressive predictive power of his theory.

So what is exerting an even more powerful downward pressure on prices than the upward pressure of maddeningly massive, exponential-level monetary expansion?

There's something happening.

Answer: Part II. Why Were Libertarians All Wrong About Inflation? The Law of Accelerating Returns