STAFF NEWS & ANALYSIS
Inflation Doesn't Exist?
By Staff News & Analysis - October 19, 2010

There is no such thing as inflation … In 1987, UK Prime Minister Margaret Thatcher whipped up a firestorm of criticism from her opponents on the left when she told a magazine reporter that "there is no such thing as society", only individual men and women, and families. The interpretation of those comments remains fiercely controversial. From the context it is not certain the prime minister was clear what she was trying to say. But according to one interpretation the prime minister was encouraging her listeners to look beyond the impersonal aggregate of "society" to the individuals behind it. The distinction between aggregates and individual components is something the Federal Reserve should bear in mind as officials mull whether to launch a new round of asset purchases to keep inflation from falling further and stimulate the recovery. Because in some sense there is no such thing as inflation, only a collection of price rises for individual items, some rising faster and some slower. – Reuters

Dominant Social Theme: Society exists but inflation does not.

Free-Market Analysis: Reuters is a media arm of the power elite and the stories that this mighty corporation disseminates tend to reinforce the power elite's various dominant and sub dominant social themes. This article reinforces two themes at the same time. The first theme or meme is that "society" may exist extant of human beings. In other words, that there is some mysterious unseen force called "society" that regulates people's behavior and that people are beholden to.

Once this article has raised Margaret Thatcher's view of society in a dismissive way, it compounds the problem by using it (perversely) as a metaphor to suggest yet another power elite meme: That the free-market definition of inflation – a monetary phenomenon – is wrongheaded. "There is no such thing as inflation, only a collection of prices, some rising faster and some slower." At the very least, the author (who seems well meaning though not apparently well-schooled in free-market economics) could at least have referred to the Austrian definition of money. It's not a secret anymore. Its written about (and argued about) on ten thousands blogs on a daily basis.

But as we have observed in the recent past, this is not how the mainstream media operates. Time, Newsweek, AP and the big mainstream media television channels are still operating as if the Internet didn't exist. This leads to all sorts of anomalies. Hard-money manager Peter Schiff, for instance, was most outspoken about an upcoming housing crash in the 2005-2006 time period, and even before then. But because much of his writing appeared on the Internet, the mainstream media did not recognize his statements or forecasts and most commentators never referred to them (unless they were directly debating him). The same treatment was given to the Mises Institute.

And yet the mainstream media has for the past two years been involved in serial breast-beating over the lack of perceptivity when it came to the upcoming financial crisis. In fact, there were dozens, no hundreds, of hard-money economists predicting that the central banking economy was going to end badly before the end of the decade. But because these opinions were not rendered by socialist economists from Yale and Harvard and did not appear in the requisite socialist-style economic journals, these opinions do not count and are not to be mentioned in polite society.

The whole mainstream media system is set up to keep the truth from emerging in any one of a number of areas. Reuters is a good example of how the system works, in fact. It is a huge wire service and the articles that move on its network have enormous dissemination. One need only find a certain kind of individual to write for the wire service in order to make effective use of it. The idea is to find writers that accept the common wisdom of the day, and this is not hard to do because journalism has been made into a "field" that includes the increasingly necessary stint at journalism school.

And what is the overwhelming perspective that informs journalism school? It is liberalism – and not the classical liberal kind either. It is hard socialism, or even soft communism. Those who attend the top journalism schools are encouraged to write exposes of business but never of government. Even aggressive reporting is under attack. Aspiring journos are taught that articles should be sourced several different ways – and on the record if at all possible – though in fact one good source (as Bob Woodward found out) is worth a 100 sources that only have second-hand information at best.

Increasingly, Forbes, Fortune, BusinessWeek and Bloomberg and other mainstream financial outlets will not hire writers to cover business issues without business degrees. Many top business writers now have both business degrees and journalism degrees. Alternatively, financial writers tend to have legal backgrounds and law degrees. The upshot is that those who are funneled into the mainstream media's reporting complex have a predetermined set of beliefs drummed into their heads. They have had to accept the prevalent elite messaging in order to get good grades and to graduate.

The problems associated with the way journalism professionals are produced is compounded by the predilection of Western (especially US) media firms to put an emphasis on the hiring and promotion of women, minorities and those with alternative sexual lives. This gives rise to a kind of grievance journalism that may perceive government (and big government) as the protector of individual rights and the private sector as the "enemy."

Conflate these sentiments with a lack of knowledge about how free-markets work and a bias against private enterprise generally as "exploitative" and you have a kind of perfect storm. Each year young people are unleashed by journalism schools – stoked with emotional resentments against private commerce – and knowing very little about free-markets. And so we get articles such as this one, excerpted above.

Misesian human action shows us quite clearly that individuals make the decisions in this world and pursue their enlightened self interest as best they can. (Is it a fiercely debated point? It ought not to be.) If there is a society that people relate to, it is not more than perhaps 150 people at most and relationships would be somewhat tribally oriented, as they have been in the past. Certainly there is no such thing as a "nation" (though people may identify with larger groups with similar tribal characteristics.) Even less is there a global government that people will "belong" too. These are elite fictions, fear-based promotions.

As regards inflation, it is quite clear that it is at root a monetary phenomenon. It has to do in a central banking economy with how many paper dollars (and electronic digits) central banks can induce commercial banks to inject into the larger economy through loans. To indicate that inflation is a price phenomenon is to put the cart before the horse. Inflation causes price increases, often irregularly. If the current system does not disintegrate outright there will eventually be a good deal of price inflation, and even perhaps hyperinflation.

We have avoided naming the writer of the article because of our oft-stated policy (more honored in the breach) that we do not want to focus inordinately on individuals when making points about free-markets, economic literacy, etc. The Reuters article we noticed probably could have been written by any one of a number of people. The point we are trying to make is that the system itself virtually manufactures such articles without any elite coercion. The entire academic and media establishment conspires to create writers and business writers with viewpoints that have little in common with free-market approaches – and less understanding of them.

After Thoughts

Western society, one could argue, has been organized to produce outcomes that favor elite perspectives. It is only because of the truth-telling of the Internet that this system has broken down, abruptly and likely irretrievably. There is a possibility in fact that more people will read this rebuttal than the original article (depending on how many newspapers pick it up). The ramifications this elite loss of media control are tremendous and we would argue they are just beginning to play out.

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