I have always understood inflation to be a function of price levels, not the supply of money.
The Fed's target is not to increase the monetary supply by 2% each year, it is to have prices increase by 2% each year. During a recession or just a general slow down and the velocity of money decreases, they increase the supply of money to offset.
Yea, inflation can be caused by supply/demand dynamics OR by a growth in monetary units in the system.
I think it would benefit society if we would use different terminology for these two things.
Do you find it unethical that a small group of people control the monetary supply?
After reading "The Creature from Jekyll Island", "Broken Money", and other related books, I'm convinced that humans having control over monetary policy will inevitably lead to morale hazard and be detrimental to society. Around 1913, this system was set up by the same Cantillionaire families whos entire incomes today is derived from inflating the monetary supply. (they were laying the groundwork for decades before 1913).
The 2% inflation is arbitrary, unethical, based on no data, and asymmetrically benefits the people who have the power to set that target.
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