Our Enemy The Fed
By Tom Woods, February 15, 2024

lizabeth Warren, like virtually all government officials, wants you to think the pain you're feeling at the store is caused by greedy businesses taking advantage of you, and has nothing to do with the Fed. Unfortunately, her opponents are doing a lousy job answering her.

Her latest complaint is over "shrinkflation," whereby instead of raising prices, companies decrease the amount of product in the package (as when, for instance, a piece of chocolate becomes smaller).

Either via shrinkflation or via rising prices, businesses according to Warren are taking advantage of consumers. This is juvenile.

Any business wants to set its price at the profit-maximizing level. A higher price is not necessarily the profit-maximizing price. McDonald's, for instance, does not want to be charging $18 for a meal in some markets. This drives its natural constituency away, as survey data is revealing in abundance.

Some sectors of the economy can see their prices rise because of changes in taste, or sudden disruptions (caused by war, natural disaster, etc.), or other such factors.

But the only explanation (barring a sudden fall in money demand, which would itself require an explanation) for rising prices across the board is an increase in the amount of money in the system.

And this is why some of the MAGA people are also getting it wrong. Rising energy prices cannot cause price inflation across the board. Rising energy prices leave less money to spend on other things, so prices are a wash. Only more money overall can raise prices everywhere.

The regime would like you to think that you are suffering because of every reason in the world EXCEPT the central bank it created and endowed with a monopoly. It's evil companies, it's "greed," it's "cost-push," whatever. It's all b.s.

Now when you take an anti-Fed position, you can expect to be told: the Fed's wise management of the economy has given us more stability, as well as fewer and shallower recessions. What, do you want to go back to the wildcat 19th century?

You should be prepared for arguments like that. Hence my free eBook Our Enemy, the Fed:

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