Many central banks around the world aim to achieve some “inflation target” either as a single explicit policy goal — as in the case of the South African Reserve Bank — or part of a set of policy goals as pursued by the US Federal Reserve. But far from maintaining economic stability and fostering prosperity, consumer price inflation targeting practically guarantees a pernicious wealth transfer year in and year out, a perpetual duping of unsuspecting employees and companies, and a permanent blind spot to hidden inflation. Inflation: it’s a wealth redistribution scheme.
Inflation can and should be abolished to rid ourselves of insidious and unjust wealth confiscation. Society can move toward this goal by the following means:
- Adopting a broader perspective on price inflation than just CPI to include producer prices, asset prices like stocks and houses, and even foreign exchange prices. This will allow the public to better identify the inflationary process.
- Recognising central banks and commercial banks as the source of inflation and including changes in the money supply (appropriately measured) as a key measure of inflation. This will start to place emphasis on understanding who are the winners and losers of the inflationary process.
- Reforming the financial system to end special money creation privileges, abolishing legal tender laws that drive people toward using manipulated currencies, and allowing any private entity to issue currency in competitive markets.
Read my full article at Mises.org.