The Veritas About Inflation

Tomorrow’s release of the March consumer price index, which is expected to jump as much as 3.7 percent over the prior year, will underscore the difficulty of getting inflation under control without a return to honest money. For some time now, the Federal Reserve has been claiming to be committed to achieving its target of 2 percent inflation, itself a rate that halves Americans’ savings within 36 years. Yet inflation has exceeded that rate for five years now.The chairman of Berkshire Hathaway, Warren Buffett, is calling for the Fed to do better. “I wish they had a zero inflation target,” he recently told CNBC. “Once you start saying you’re going to tolerate 2 percent, that compounds pretty dramatically over time.” The Oracle of Omaha grasps that inflation is “a tax that hits savers the hardest,” as CNBC sums up his view, especially after taxes are factored in. The Fed’s target, Mr. Buffett said, means that “you’re saying to people, if you’re getting less than 2 percent on your money, you’re going backward.” Worse yet, he lamented, “if you pay tax, you may pay tax on the 2 percent,” further eroding earnings. Contrast Mr. Buffett’s view with that of the Fed chairman, Jerome Powell, who recently sought to elucidate to a group of Harvard students the central bank’s rationale for promoting inflation. Mr. Powell fretted that before the pandemic, as Grant’s Interest Rate Observer reports, “we had inflation below target, and pretty much the whole profession was trying to solve, How do we get inflation up to 2 percent? That was really the problem.” Yet as Grant’s asked, “What kind of a problem is too little inflation? The Harvard students, Grant’s reports, seemed “content” to accept that “a bit of inflation is the sine qua non of a growing economy.” The last five years have belied that notion, though. Shortly after President Biden was sworn, in February 2021, the CPI rose 1.7 percent over the prior year. That was the proverbial calm before the storm as the Democrats’ overspending and overstimulating helped usher in a tsunami of inflation that crested in June 2022 at 9.1 percent. The Fed’s monetary manipulations, too, like Quantitative Easing, contributed to this inflationary wave.By last spring the pace of inflation had slowed, to, say, 2.3 percent in April 2025, but the cumulative effect of the Biden inflation has enraged American consumers. Now, prices appear to be creeping up at a faster pace again. Yet the roots of this inflation stem from our system of fiat money in which the dollar has lost its legal definition in terms of a fixed weight of specie. Under the gold standard, the logic of convertibility helped hold prices steady over the long run.Today’s goal of 2 percent inflation would, after all, have shocked the financial establishment of the 19th century, when America hewed to the constitutional sound money policies launched by Treasury Secretary Andrew Hamilton. The average annual pace of inflation was 0.2 percent between1790 to 1913, economists William Luther and Alexander Salter reckon. In the gold standard’s heyday, between 1890 and World War I, annual inflation was 0.1 percent.A policy of fiat money inflation, these columns have warned, fuels asset bubbles, vast accumulations of debt, and the “illusion of wealth.” It’s not our intention here to blame Mr. Powell, per se, for these policies. Yet with President Trump’s nominee for Fed chairman, Kevin Warsh, slated next week for nomination hearings, the moment could be ripe to chart a new course on inflation that can attain the goal stated by Mr. Buffett — and America’s Framers.

The Veritas About Inflation

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