Stop the Presses
- Monday, November 22, 2004
In Austria during the 1920s, a group of government experts approached the famous Austrian economist Ludwig Von Mises and asked him what they could do to stop the scourge of rampant inflation. Mises answered mysteriously, instructing them to meet him at midnight at a certain intersection in downtown Vienna. Later that evening, Von Mises met with the dignitaries at the agreed-upon coordinates. He said to them, "Do you hear that noise?" They answered that they indeed heard a low-grade rhythmic hum coming from the adjacent building. It was the sound of the presses, which at that time had been running 24 hours a day, printing out an endless supply of new currency. Von Mises said to them that if they ended that humming sound they would end the inflation.
The answer is exactly the same now as it was then. Our weakened dollar is not due to the Bush tax cuts (as the Times says), nor due to global trade (as Greenspan has implied), it is due to over-supply of new money, in the American system of government, that policy is determined by the Fed, not by the president. The new Consumer Price Index and Producer Price Index numbers which came out earlier this week have only confirmed what the markets sensitive indicators have been predicting. Inflation is a genuine, but not overwhelming, problem. Sound money is the solution.
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