Money isn’t wealth. It measures wealth the way a ruler measures length, a clock measures time and a scale measures weight.
Boy is this true, but so many people, including the supposed shamans at the Fed fail to grasp (or choose oddly to ignore) this basic concept. Dumping “money” into the economic system isn’t going to make the economy grow, it will only make the money currently in the system worth less.
It’s not quite that simple. But it’s nearly that simple.
Nonetheless, the worthies now cavorting in Jackson Hole, particularly Janet Yellen, still prattle on about how inflation is necessary to get their economies moving again. During her Senate confirmation hearing late last year to succeed Ben Bernanke as Fed head, Yellen openly proclaimed her belief that 2% inflation is just what the doctor ordered for our ailing economy. No senator asked her to explain just how raising the cost of living for a typical American family by $1,000 a year is supposed to create prosperity.
Inflation actually retards long-term growth. Had the U.S. maintained its average historic growth rate that it experienced for 180 years under the gold standard (it went off gold in 1971), the American economy today would be 50% larger, i.e., more than $8 trillion bigger.
That’s a staggering, sobering statistic.