ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Education and Science»
  • Economics

The Fed & Inflation: Does “Big Gov” Really Care?

Updated on December 28, 2011

Inflation this, inflation that, you hear the word on the mainstream media all the time; but what exactly is inflation? In economics, inflation is just a rise in the general level of prices of goods and services in an economy over a period of time (Mankiw). Sounds simple enough, but here’s where it gets a bit more complicated: whenever the general price level rises, each unit of currency buys fewer goods and services—therefore, in the long-term, money ends up losing value. In essence, inflation has the propensity to lower the purchasing power of money. And in a market based economy, this is bad news. Why is this bad? It’s bad because it nullifies two primary functions of money, whereby, it doesn’t allow money to operate as both a medium of exchange and a unit of account.

Why would the government want to invalidate the functions of money? It’s important to mention how the government uses the notion of inflation as a red herring to distract the American people into tampering with our money supply. Through fallacious monetary policies “big gov” cajoles the American people into buying this notion that inflation has to be kept at bay; which in a free market capitalistic system isn’t possible. It’s a complete macroeconomic hoax to believe that government can keep prices in check, and that government can use the quantity of money to stir the business cycle towards long-term growth. The only way to attain true long-term growth is through laissez faire capitalism—an economic system whereby government doesn’t get so much involved into the affairs of markets.

What’s monetary policy? The primary responsibility of the Federal Reserve System is the formulation of monetary policy. In rational economic terms, monetary policy involves tampering with (increasing and decreasing) the supply of money to achieve unattainable long-term monetary goals. This definition falls in line with economist Micheal Parkin of the textbook Macroeconomics, when he says the following:

The Fed’s goals are to keep inflation in check, maintain full employment, moderate the business cycle, and contribute toward achieving long-term growth. Complete success in the pursuit of these goals is impossible, and the Fed’s more modest goal is to improve the performance of the economy and to get closer to the goals than a “hands off” approach would achieve. Whether the Fed succeeds in improving economic performance is a matter of which there is a range of opinion.

So if the goals of the Federal Reserve aren’t achievable, then the end doesn’t justify the means. In general, the long-term “end” of monetary policy is to ensure that money & credit grow sufficiently to encourage “non-inflationary” economic expansion. Therefore, the “means” by which to achieve this aren’t warranted. In fact, the Feds efforts overtime has shown to be counterintuitive—that is to say, if on one hand, government mandates that “growth of money & credit” is needed for progressive economic expansion, but on the other hand this “growth of money & credit” could possibly lead to inflation. Then it’s safe to say that government has a hand in creating the one thing that it’s trying to avoid. A weird irony isn’t it? If you really think about, “big gov” is creating the problem that it’s trying to solve. To be exact, “monetary policy” is its own worst enemy!

Let’s say in high school, I managed to get this really pretty girl to go out with me, we date for awhile, then all of sudden, she dumps me. I then make this internal pledge to myself that, “I’ll never date a really pretty girl like that again.” But when I make it to college, I’m surrounded by a bunch of girls way prettier than my high school girl friend. So, you see, the one thing I am trying to avoid, I can’t help but do, because it’s almost inevitable. The internal pledge I made to myself comes back to bite me on “the you know what” because of how stupid of a pledge it was make in the first place. In my next series of hubs about inflation, we get into the heart and soul of our problem in this country and why, over the years, it has been mistake after mistake by the government that has caused our great economic engine to backfire.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: ""

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)