Many citizens want more government control of the economy to curb rising prices. It is the worst strategy imaginable. Interventionist governments never reduce consumer prices because they benefit from inflation, dissolving their political spending commitments in a constantly depreciated currency. Inflation is the perfect hidden tax. The government makes the currency less valuable by issuing more units of fiat money, partially dissolves its debt in real terms, collects more taxes, and presents itself as the solution to rising prices with subsidies in an increasingly worthless currency. That is why socialism and hyperinflation go hand in hand.

Socialism rejects human action and economic calculation and sells a false image of a government that can create wealth at will by issuing more units of fiat currency. Obviously, when inflation arrives, the socialist government will use its two favorite tools: propaganda and repression. Propaganda, which accuses stores and businesses of driving up prices, and repression, which occurs when social unrest intensifies and citizens legitimately hold governments accountable for scarcity and high prices, are the two main strategies.

Global liquidity is expanding. In the past three months, the global money supply has soared by $4.7 trillion. This rapid increase started when the Federal Reserve panicked the first time and delayed the normalization of the balance sheet in June.

Since then, we have seen a chain of fresh stimulus policies implemented by developed economies, adding to the large fiscal packages already in place. Multi-trillion-dollar investment packages like the EU Next Generation Fund now include massive deficit spending plans. However, money velocity is not rising. All these programs only lead to secular stagnation. Government projects and current expenditures are consuming money at an unprecedented rate.

Developed economies cannot live without new and larger spending plans. The result is more debt, weaker productivity growth, and declining real wages.

The Federal Reserve decided to cut rates by 50 basis points despite what Chairman Powell considers “no risk of a recession or downturn,” a “solid economy,” and a “strong job market.”

After ignoring the impact of monetary aggregates and the warning signs of inflation, the Federal Reserve has breached its price stability mandate for three consecutive years, preferring to prioritize liquidity injections, i.e., printing money, to the recovery of the currency’s purchasing power.

The “higher for longer” policy only lasted eighteen months. Furthermore, the latest reading of the Chicago Fed National Financial Conditions Index indicates extremely loose conditions. In fact, the Fed has never cut rates by so much when financial conditions have been this loose.

Global money supply has soared by $20.6 trillion since 2019, according to Bloomberg.

Additionally, global debt surged by over $15 trillion in 2023, reaching a new record high of $313 trillion. Around 55% of this rise came from developed economies, mainly the U.S., France, and Germany. Unfunded liabilities in the United States amount to $72 trillion, almost 300% of GDP. This may seem high until you look at Spain with 500% of GDP, France with close to 400%, or Germany with close to 350% of GDP.

There is no escape from debt. Paying for the government’s fictitious promises in paper money will result in a constantly depreciating currency, thereby impoverishing those who earn a wage or have savings. Inflation is the hidden tax, and it is very convenient for governments because they always blame shops or businesses and present themselves as the solution by printing even more currency.