Chart of the Day: The Inflation Cycle

Today’s crisis-political response feedback loop mechanism incisively captured by this diagram from Zero Hedge.

The reason for this as resoundingly pointed out by Professor Ludwig von Mises in his magnum opus the Human Action, more than half a century ago,

The hindrance that the monetary or circulation credit theory had to overcome was not merely theoretical error but also political bias. Public opinion is prone to see in interest nothing but a merely institutional obstacle to the expansion of production. It does not realize that the discount of future goods as against present goods is a necessary and eternal category of human action and cannot be abolished by bank manipulation. In the eyes of cranks and demagogues, interest is a product of the sinister machinations of rugged exploiters. The age-old disapprobation of interest has been fully revived by modern interventionism. It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether. All present-day governments are fanatically committed to an easy money policy.

The more things change, the more they stay the same.