Rand Paul: “Many government and Federal Reserve officials have repeatedly argued that we have no inflation to fear; yet those who…”

“Many government and Federal Reserve officials have repeatedly argued that we have no inflation to fear; yet those who claim this define inflation as rising consumer and producer prices. Although inflation frequently leads to price increases, we must remember that the free market definition of inflation is the increase in supply of money and credit. Monetary inflation is seductive in that it can cause great harm without significantly affecting government price indices. The excess credit may well go into the stock market and real estate speculation, with consumer price increases limited to such things as energy, repairs, medical care and other services. One should not conclude, as so many have in the past decade, that we have no inflation to worry about. Imbalances did develop with the 1990s monetary inflation, but were ignored. They are now becoming readily apparent as sharp adjustments take place, such as we have seen in the past year with the NASDAQ. When one is permitted to use rising prices as the definition for inflation, it is followed by a nonsensical assumption that a robust economy is the cause for rising prices. Foolish conclusions of this sort lead our economic planners and Federal Reserve officials to attempt to solve the problem of price and labor cost inflation by precipitating an economic slowdown. Such a deliberate policy is anathema to a free market economy.”