Frank's Musings

Particularly following an economically devastating pandemic, dampening the price inflation that normally accompanies reawakening commerce defeats the country’s natural adjustment process

Price is a tool for allocating limited resources among consumers and businesses. It isn’t a standard of economic stability; it merely demonstrates relative scarcity of various assets, and their fungibility. When prices rise, something has caused friction in the smooth functioning of the market where assets are exchanged between living agents.

When an exogenous event like a pandemic disrupts the market’s expectations, a psychology that anticipates unending price rises may set in. Adding more tinder to the fire by raising interest rates will only exacerbate inflation, not quell it. The marketplace is a lot smarter than any group of political appointees when it comes to assimilating COVID-19.