The Most Economically Illiterate Tweet of 2023?

June 10, 2023 by Dan Mitchell @ International Liberty

I periodically write columns about “most ___ tweets.” Here are some recent examples.

• The Most Half-Right Tweet of 2023
• The Most Laughable Tweet of 2022
• The Most Enjoyable Tweet of 2022
• The Most Painful (for Our Leftist Friends) Tweet of 2021
• The Most Morally Reprehensible Tweet of 2021
• The Most (Unintentionally) Accurate Tweet about Washington
• The World’s Most Depressing Tweet

Today, we will turn our attention to what may be the most economically illiterate tweet of 2023.

Check out this gem from CNN.

Needless to say, CNN‘s tweet is grotesquely wrong, or at least misleading. We know what caused inflation.

It was reckless and irresponsible monetary policy by the Federal Reserve in Washington.

How reckless and irresponsible? Check out this chart showing the Fed’s balance sheet, which is a good way of showing changes in monetary policy. As you can see, the Fed dramatically shifted to an easy-money policy when the pandemic began.

At the risk of stating the obvious, we got inflation because the Fed flooded the economy with money.

By the way, I have never criticized the Fed for panicking when the pandemic began. Many people feared the economy would totally freeze up.

The Fed does deserve criticism, however, for continuing with an easy-money policy in the last half of 2020 and all through 2021. It was obvious at that point that the world was not going to collapse.

Here are five additional comments:

1. Since the big mistakes were made starting in 2020, before Biden was elected or inaugurated, he doesn’t deserve blame (except to the extent that – like Trump – he supported the Fed’s bad policy).
2. I am becoming more sympathetic to the argument that the Fed’s bad policy is motivated by “fiscal dominance.”
3. Fortunately, I don’t think anyone at the Fed is crazy enough to believe in “modern monetary theory.”
4. It is silly to blame inflation on “corporate greed” or “corporate profits” unless you bizarrely think that companies became greedy profit-maximizers in 2022 and didn’t care about money in the preceding years.
5. It would be nice if officials from the Federal Reserve (and other central banks) acknowledged their mistakes. At the very least, don’t try to blame others.

I’ll close by pointing out that the title of this column ends with a question mark. That’s because the underlying CNN story isn’t really about the causes of inflation. Instead, the story references a study showing how businesses operate in a high-inflation environment.

So perhaps CNN is only guilty of a sloppily worded tweet (sort of like NBC being guilty of sloppiness when doing a poll on causes of inflation and not including the Federal Reserve as one of the potential answers).

P.S. If you have the time and interest, here’s a 40-minute video explaining the Federal Reserve’s track record of bad monetary policy.

P.P.S. If you’re constrained for time, I recommend this five-minute video on alternatives to the Federal Reserve and this six-minute video on how people can protect themselves from bad monetary policy.