It doesn’t really seem like anything good comes out of inflation, does it? Can’t the government stop inflation? Are they failures, who have tried, but simply cannot succeed?
Some consumers and businesses would probably like the government to stop inflation, if it could. Discover if the government has an answer for inflation. If inflation is unstoppable, then maybe you need some way to control its ill effects.
Does the Government Like Inflation?
When you inflate a balloon, you blow it up. It becomes very large and full of air. It is the most festive state of the balloon.
The problem with inflation in the economy is that it might create asset bubbles. If inflation increases faster than wages, then consumers will experience an overall loss of purchasing power. The US government closely tracks inflation using its Consumer Price Index (CPI).
If prices are going up too quickly, can the government do anything to stop them? Yes.
The government actually has plenty of tools for controlling prices. In fact, under President Nixon, prices were frozen. This is usually standard practice during wartime.
Businesses cannot charge more than a certain amount for their merchandise. You might also see this with cigarettes. The Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE) has oversight over cigarettes and may control these prices to prevent them from being sold over state lines.
The United States Treasury is responsible for printing money in the country. It can decide how many paper dollars it wants to print each year. If it prints more paper dollars than productivity increases, then inflation might result.
The government’s control of money supply is called Monetary Policy. It can adjust its monetary policy to curb inflation. It must be very careful, though.
Capital is a key input for production. If the government cuts capital sources too dramatically, then it might harm productivity. That is partially what is at work after the 2008 Sub-Prime Mortgage Crisis.
The Federal Reserve increased the money supply to spur production. In fact, the Fed lowered interest rates to ZERO (ZIRP) in order to help businesses create jobs. Has that been successful?
Some jobs have been saved, so the Fed is happy about those results. So far, inflation has been muted, so the Fed is happy about those results. But, inflation may be creeping higher.
There have been many rumors of higher inflation and higher interest rates. This has caused some worry. Investors are worrying about the Dow Jones bull market being pushed into a bear market.
Gold is Stable
Uncertainty can be troublesome for wealthy people with plenty of assets. They need to find a way to protect their wealth. That is why they turn to the US Money Reserve.
At the US Money Reserve, you can read about a Gold IRA. You can purchase gold to protect your wealth. The government might not be able to stop inflation, but gold can be used to mute its impact.