They're Lying To You | High Interest Rates Aren't Fighting Inflation
The problem with Keynesian economic laws is that too many of them are not really laws at all. If an orange drops from a tree and hits my head, my head was hit with an orange—that’s a law. If I have lived for 75 years, I am 75 years old—that’s another law. These are laws of necessity. It’s not just unintelligible to say, “I have lived 65 years. Therefore, I am 85 years old,” it’s unimaginable.
Economists at the central bank say (at least publicly), “We are raising interest rates to fight inflation.” They act as though high interest rates and low inflation, or high inflation and low interest rates, is an observable, definite law of economics.
But these economists haven’t discovered a law. At best, they’ve discovered a coincidence. They tell us, “raising interest rates will quell inflation,” as though falling inflation is inevitable and necessary when interest rates rise, and proceed accordingly. But is there really any truth to their claim?
Venezuela has an interest rate of almost 60%. Turkey’s interest rate hovers near 15-16%, and Brazil’s interest rate is climbing to 12%.*
The scourge of hyperinflation oppresses all three nations.
As bad as that is, none of those nations are in so perilous a condition as Zimbabwe. Their price increase between 1980 and the present day equals 345 814 511 410.02%.**
“They should just raise their interest rate to bring inflation down!” central-bank economists might say.
But they have raised their interest rate. They've raised it to an all-time high of 200 percent; their inflation has not decreased.*`
Thus, it's clear that a soaring interest rate does not necessarily mean grounded inflation. Milton Friedman understood this when he said,
“After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.”
Again, high-interest rates do not equal low inflation. At least, not necessarily. Economic history proves it, and so does the present situation of countries worldwide. In this, either our central bankers are:
1. So foolish and blind, it’s practically a miracle.
2. Pursuing these economic objectives like a chicken with its head cut off on purpose.
Considering Trudeau is trying to restructure the economy, and considering Canada’s sovereign said,
“We also know that countries…simply cannot afford to go green. Here we need a vast military-style campaign to marshall the strength of the global private sector…It offers the only real prospect of achieving fundamental economic transition.”,*``
which do you think it is?
I hope you enjoyed! If you liked what you read and would like to support the site allowing me to continue writing articles, click here! Thank you so much
If you’d like to stay informed about the Christian's perspective of current events, or if you’d like to join our growing community of members who love truth, subscribe here!