It’s the Fed, Joe!
Back in May, President Biden accused greedy corporations of causing inflation by not paying their “fair share”. Before that he blamed rising food and fuel costs on Russia, calling it “Putin’s price hike”. But people who understand the way money and business work know that the soaring inflation and rising prices have nothing to do with greedy corporations or Russian presidents.
The Federal Reserve’s monetary policy, which is mainly focused on controlling the money supply, can have a significant impact on inflation, and by extension a significant impact on our everyday lives. When the Fed pumps more money into the economy through its various tools, it increases the money supply and causes prices to rise, leading to inflation. This increase in prices means that purchasing power decreases and people’s financial situations can worsen over time. Inflation also erodes the value of savings, resulting in lower real returns on investments and reduced purchasing power for those who have saved. Moreover, inflation can cause a currency devaluation which further reduces the purchasing power of consumers.
In addition to impacting people’s personal finances, inflation from Federal Reserve policy can also be felt in the larger economy. Businesses face higher costs, leading to less competitive prices and fewer jobs. This creates a drag on economic growth and causes wages to stagnate as employers are unable to pay their workers more due to rising costs. Moreover, when inflation is too high, it can encourage people to hoard cash or invest in assets rather than spending money and driving economic activity, further slowing the economy.
It is false to blame “greedy” corporations for higher prices, as this implies that they are purposefully taking advantage of consumers by raising their prices. In reality, it is the Federal Reserve’s monetary policy which causes inflation and leads to higher prices. When the Fed pumps money into the economy, it increases the money supply and causes prices to rise. This increase in prices means that purchasing power decreases and people’s financial situations can worsen over time. Moreover, businesses face higher costs due to inflation, leading them to charge more for their products and services in order to make up the difference in cost.
Quantitative easing (QE) is a monetary policy tool used by central banks to increase the money supply in the economy. This is done by purchasing assets such as government bonds or mortgage-backed securities from dealers, thereby increasing liquidity and reducing borrowing costs. QE is typically used by central banks to stimulate the economy when traditional tools, such as lowering interest rates, have failed to do so. Sometimes, like in 2020, the government simply prints a whole bunch of money to offer cash payments to businesses and individuals.
However, QE also has some potential drawbacks. By increasing the money supply, it increases the risk of inflation which can erode people’s purchasing power over time. Additionally, there is a risk that QE could lead to asset bubbles if prices become overinflated due to the increased money supply, like what we saw in 2008, and what we are seeing again now.
So why do people like Joe Biden get away with blaming inflation and soaring prices on “greed”? Because they’re depending on people not knowing the real history of money, and the real power of the Federal Reserve. The Tuttle Twins and the Creature from Jekyll Island teaches kids (and parents!) the true history of our money, and tells the story of the secret meeting by wealthy bankers and powerful politicians that changed the course of American monetary policy and impacted our financial security forever.
Joe Biden and others like him are dependent on an ignorant population to accept their blame-shifting away from the Fed and toward whatever boogeyman they can dream up at the time. Teach your kids the truth, and they won’t be fooled by politicians and pundits and their strawmen.