Monday, June 9, 2008

The New York Sun's Home Run

The New York Sun has hit a home run. I had previously blogged about my concern that the Sun's and Fox's coverage of the recent upsurge in prices has omitted the underlying cause: monetary expansion. This is of concern because economists have come up with many nonsensical explanations for inflation such as "cost push" inflation, "demand pull" inflation, unions cause inflation, oil prices cause inflation, consumer expectations cause inflation, speculators cause inflation, ad infinitum and ad nauseum. In the 1970s such spurious explanations reached a crescendo when President Ford wore a button that said "Win" if I recall, and argued that "jaw boning" would stop inflation. Worse, President Nixon had implemented price controls and controls on gasoline prices led to endless lines.

It doesn't take much to expose an unclothed Emperor. The Sun has come out and forthrightly said that the Fed has caused inflation. It will be hard for the mainstream media to spin the kind of fabrications that it spun in the 1970s. The Sun deserves a Pulitzer Prize for this editorial. Perhaps single handedly it will stop the establishment's reluctance to take the necessary steps to end the inflationary cycle and the mainstream media's eagerness to blow smoke in support of inflation.

The media have every reason to fabricate nonsense explanations for inflation. As I have previously blogged, there are special interests that demand inflation: the commercial banks, Wall Street, the real estate business and stock investors. The working man, the conservative saver and the entrepreneur who looks to build a business over the long term are harmed. Thus, in exchange for short term heating of the economy, the public loses entrepreneurial vision, the withdrawal of competent labor (as honest workers are diverted into less productive activities like stock investing), and there are dramatic increases in uncertainty for people on fixed incomes. It is also true that demand for labor is stimulated, but the jobs so created are temporary because the businesses that are created are of insufficient quality to survive the inevitable economic downturn that occurs when the Fed tightens interest rates because it has become politically impossible to continue printing money. By then, fortunes have been extracted from the public by those who had first access to the new money, namely hedge fund managers, and the public pays through higher prices and increased poverty.

Let us applaud the New York Sun and be thankful that at least one firm in lower Manhattan has clear vision and integrity.

No comments: