“A mandate for deflation”: That’s how monetary sage James Grant, in the latest number of the Interest Rate Observer, describes President Trump’s remit from voters as his second term nears. Mr. Grant points to a CBS News-YouGov poll asking Americans what they thought Trump “should prioritize” in his transition. “An overwhelming majority,” some 79 percent, “said lowering the price of goods and services,” the Observer reports. Will the Fed allow it?

The question looms large after an election that hinged on inflation. Prices surged, on average, some 20 percent during President Biden’s tenure in office — and staples like bread, beef, eggs, sugar, and even peanut butter soared by more than 40 percent. Trump’s platform pledge to “defeat inflation” was doubtless a factor when voters cashiered Mr. Biden’s vice president and hoisted the 45th president back into office.

The CBS/YouGov poll is a reminder that the voters’ frustration over inflation has not ebbed since November 5. “The expressed public preference,” Mr. Grant reports, “was not for a reduction in the rate of rise of prices but for a drop in the level of prices.” Ay, there’s the rub — at least for the prospect of lower prices under America’s fiat money system. That’s because prices measured in fiat dollars always move in one direction: up.

By contrast, under the gold standard, because dollars are convertible into gold at a fixed rate by law, even if prices sometimes rise, the discipline imposed by convertibility means they will fall again. That is why America’s average annual rate of price inflation during the span between 1790 and 1913, when the Federal Reserve was created, was but 0.2 percent. That puts to shame the Fed’s halting efforts to get inflation back down to its chosen target of 2 percent.

Such historic low rates of inflation, Mr. Grant has noted, were in part a reflection of the astonishing technological innovations of the late 19th century. The outburst of creativity served, he explained, to “advance the proposition that falling prices are a natural byproduct of human ingenuity.” As Mr. Grant explains, “Let Fulton harness steam power, Edison the incandescent bulb or Gore the Internet, and more work will be done by fewer hands.” 

As a result, Mr. Grant adds, “some prices will fall, some people will lose their jobs and some portion of the world’s capital stock will be cast into obsolescence.” That earlier era was a time, he says, when “invention flowered, productivity growth galloped ahead and prices, accordingly, fell — by 1.7% a year between 1875 and 1896.” Mr. Grant cautions against “intervening to mitigate the sting of these adjustments” — in short, trying to stave off deflation. 

Fear of deflation, though, has been guiding Fed policy since the tenure of Mr. Powell’s predecessor Ben Bernanke. Yet the Fed’s efforts on this head, by keeping interest rates artificially low and accumulating trillions in assets under the guise of Quantitative Easing, helped to fuel an asset bubble — while also enabling the huge run-up in federal debt. The Fed’s fingerprints are, too, on the inflationary spiral that plagued Mr. Biden’s tenure.

Feature how in February 2021, Mr. Powell cheered on Democrats in Congress as they lavished $1.9 trillion in stimulus spending for an already-recovering economy. That month, Mr. Powell also crowed that the Fed would be acting to stave off any danger of deflation. “Following periods when inflation has been running persistently below 2 percent,” he said, “appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.”

That, Mr. Powell said, was “in the service of keeping inflation expectations well anchored at our 2 percent longer-run goal.” Did deflation anxiety keep the Fed from heading off the Biden inflation wave that peaked with a 9 percent spike in the Consumer Price Index in July 2022? If President-elect Trump is going to fulfill his pledge to “defeat inflation,” as the voters demand, he is likely on a collision course with the Fed’s counterproductive fear of deflation.