Over the two-year period ending in December 2012, prices for the major consumer spending categories of apparel, food and beverage, transportation, and medical care all widely outpaced the government’s official inflation rate. This is because, as Dr. Miles found, the Consumer Price Index gives approximately equal weighting to housing costs and the other major categories. It explains why even though the reported inflation rate is around 2%, voters in the 2012 election exit polls listed rising prices nearly tied with unemployment as their primary economic concern.
“This paper rebuts the Fed’s notion that it can continue to print money and keep prices from rising substantially,” American Principles Project president Frank Cannon said. “The best way for politicians to connect with what voters are complaining about is to talk about how to we can end a monetary policy that robs people of their purchasing power.”
Dr. Miles, president of Global Economic Solutions and co-author with fellow economist Arthur Laffer, also found that the Fed’s zero interest rate policy is hurting the recovery by channeling investment toward capital rather than labor. “The persistent, extremely low interest rates are keeping real wages from climbing and retarding the rate of hiring. The Federal Reserve is making unemployment worse than it has to be,” noted Dr. Miles.
You can read the paper below. American Principles Project has been working to educate lawmakers about the need for monetary policy reform to restore the gold standard.
Photo credit: Holly Brown Ford via Flickr (CC-By-SA 2.0)