Many believe the key cause to a general increase in prices are so-called “inflationary expectations.” For instance, if there is a large increase in the prices of oil, individuals will start forming expectations for higher inflation ahead. Consequently, individuals will speed up their purchases of goods and services at present, thereby raising the demand for goods and services, all other things being equal. This is supposed to set in motion general price increases. According to the former Fed Chairman Ben Bernanke, “Undoubtedly, the state of inflation expectations greatly influences actual inflation and thus the central bank’s ability to achieve price stability.”…..
The fixing of the money supply’s growth rate at a certain expected percentage does not alter the fact that money supply continues to expand. It will lead to the diversion of resources and distortion of the price and production structure, reduce purchasing power, and produce business cycles. Hence, the policy of stabilizing prices will generate more instability!
Contrary to popular thinking, inflation is not about increases in prices, but about increases in money supply. Also contrary to various commentators, inflationary expectations—in the absence of increases in money supply—cannot cause a general increase in the prices of goods and services.
The science of praxeology has laws and rules that are universal, at least in the universe of humanity, and apply everywhere. Shostak is the quintessential Austrian in his outlook on inflation and the cause of inflation. His root cause of inflation is the expansion of the supply of money, nothing more, nothing less. All the talk about expectations is a way to hide what is really going on when the Federal Reserve Bank increases the money supply: theft. They are creating something out of nothing and taking away from the value of your fiat currency. Can’t wait until they are unable to do this anymore. BTC FTS