No, Christine Lagarde, Inflation Did Not “Come From Nowhere”

This is an opinion editorial by Federico Rivi, an independent reporter and author of the Bitcoin Train newsletter.We are raising rates of interest “since we are battling inflation. Inflation has come out of virtually nothing.” Stated European Central Bank President Christine Lagarde, host of the Irish talk program Late Show on Friday, October 28, 2022. Words apparently contradicting a statement that came soon later on in the very same interview. Inflation, she said, is triggered “by Russian President Vladimir Putins war in Ukraine. […] This energy crisis is causing huge inflation that we have to defeat.”The Rate HikeThe day before the interview the European Central Bank had raised rate of interest by an additional 75 basis points, bringing the overall growth used in the last 3 meetings to 2%: the greatest level because 2009. In all likelihood it will not end there, as the Governing Council plans to “raise rates further to make sure a prompt return of inflation to its medium-term objective of 2 percent.”According to the most recent data, the increase in costs in the euro location has in fact reached levels never ever seen in the last 20 years: +9.9% in September compared to the very same month last year. Nations like Latvia, Lithuania and Estonia are seeing price increases of 22%, 22.5% and 24.1% respectively.In the prevalent agreement on the significance of the term inflation, nevertheless, there is a major disparity. A distortion of the genuine principle that leads leaders, specialists – and consequently the media – to attribute different causes to the word, depending upon the benefit of the minute. When the cause, in truth, is constantly and only one.Inflation And Price Increases Are DifferentFor numerous, inflation is now synonymous with increasing costs. This is not simply a prevalent belief however a meaning that has actually also been embraced by economics books and the main language. According to Cambridge Dictionary inflation is “a basic, continuous boost in rates.”But is this truly the case? Bitcoin teaches one thing: Dont trust, validate. And by confirming, an issue emerges: the turnaround of cause and effect.Inflation is dealt with as the result of a specific event: an energy crisis, a chip lack, a dry spell can all lead to greater costs for items and services in particular sectors. But in truth inflation, in its original meaning, does not mean the rise in prices, it shows its cause.The clue comes directly from etymology: inflation originates from the Latin word inflatio, itself a derivative of inflare, i.e. to inflate. Think about inflating a balloon: the act of inflare (inflating) is when air is blown from the mouth into the balloon: the cause. The instant repercussion is the expansion of the volume of the balloon that is taking in air: the result. Pumping new air into the balloon is the action that leads to its growth. The exact same thinking applies to money: the extremely act of printing money is inflation and its repercussion is a boost in costs. This reversal of domino effect was currently described in the late 1950s as semantic confusion by one of the most prominent financial experts of the Austrian school, Ludwig von Mises:”There is nowadays a really reprehensible, even harmful, semantic confusion that makes it very hard for the non-expert to grasp the real state of affairs. Inflation, as this term was constantly utilized everywhere and particularly in this nation, means increasing the quantity of cash and bank notes in circulation and the amount of bank deposits subject to check. However individuals today use the term “inflation” to describe the phenomenon that is an unavoidable consequence of inflation, that is the propensity of all prices and wage rates to increase. The result of this awful confusion is that there is no term delegated symbolize the cause of this rise in wages and rates.”If, therefore, there can be numerous causes of cost boosts, there can not be as lots of reasons for inflation since it is itself an origin of rate boosts. It would be far more sufficient and intellectually sincere to state that the decrease in acquiring power can result from numerous elements consisting of inflation, i.e. the printing of money.Money FloodingSo how has the European Central Bank acted in regards to financial issuance in the last few years? The most effective figure to understand this is the ECB balance sheet, which shows the countervalue of properties held: those assets for which the Eurotower does not pay but acquires by producing brand-new currency. Since October 2022, the ECB held almost EUR 9 trillion. Before the pandemic, at the start of 2019, it had around 4,75 trillion. Frankfurt has nearly doubled its cash supply in three and a half years.Euro Area Central Bank Balance Sheet. Source: Trading EconomicsIf we determine the amount of euros circulating in the form of deposits and banknotes – the figure defined as M1 – the number is slightly more comforting, but not much: at the start of 2019 there were almost EUR 8.5 trillion in flow, today there are 11.7 trillion. A development of 37.6%. Euro Area Money Supply M1. Source: Trading EconomicsAre we really sure, then, that this price growth – or as it is incorrectly called by everyone, inflation – originates from nowhere? Or that it is just an effect of the war in Ukraine? Given the quantity of money supply injected into the marketplace in the last three years, we should count ourselves lucky that the typical cost growth of products and services is still stuck at 10%, due to the limitations of the pandemic and the subsequent recession we are entering.What does Bitcoin relate to all this? Bitcoin has everything to do with it because it was born as an alternative to the economic disasters for which central banks continue to make themselves responsible. An option to the bubbles of unsustainable development alternating with ruinous crises triggered by the market control of the interventionist paradise. Bitcoin can not inform the world that “inflation originated from no place,” due to the fact that its code is public and everybody can check its monetary policy. A policy that does not alter and can not be manipulated. It is repaired and will stay so. 2.1 quadrillion satoshis. Not one more.This is a guest post by Federico Rivi. Viewpoints revealed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Countries like Latvia, Lithuania and Estonia are seeing cost boosts of 22%, 22.5% and 24.1% respectively.In the prevalent consensus on the meaning of the term inflation, however, there is a major disparity. When the cause, in truth, is always and only one.Inflation And Price Increases Are DifferentFor numerous, inflation is now synonymous with increasing rates. In truth inflation, in its original significance, does not indicate the increase in prices, it suggests its cause.The idea comes directly from etymology: inflation comes from the Latin word inflatio, itself a derivative of inflare, i.e. to inflate. Individuals today use the term “inflation” to refer to the phenomenon that is an unavoidable consequence of inflation, that is the propensity of all prices and wage rates to increase.”If, therefore, there can be numerous causes of cost increases, there can not be as many causes of inflation because it is itself an origin of cost increases.