by Gary North

The United States is not going to get hyperinflation unless Congress nationalizes the Federal Reserve System.

It will get mass inflation at some point: anywhere from 15% per annum to 30%. But it is not going to get 50% or 100% or more.

Why not?

1. The temporary nature of the payoff
2. The fear of getting blamed
3. The boom-bust cycle
4. The employees' vested pension fund

2. THE FEAR OF GETTING BLAMED

Ben Bernanke is under fire as no FED chairman ever has been. The critics are in the millions. This is historically unprecedented. There is a cause: Ron Paul. Ron Paul has focused millions of voters' attention on the FED and Bernanke. Bernanke cannot escape scrutiny any longer.

If there is hyperinflation, millions of voters will know who did it: Bald Ben the Beard and his crew of yes-men on the Board of Governors. Investors know more about the FED today than they did in 2007. This knowledge will increase.

Then there is the Internet. The mainstream media cannot control the flow of information any longer. Word gets out, and you may have noticed, not much of it is favorable to the FED.

The FED is desperate to avoid an annual audit by the Government Accountability Office. This is good. It means that people other than Ron Paul are calling for such an audit.

Rick Perry used the word "treasonous." Michelle Bachmann has called for a FED audit. Ron Paul is still running. The FED is today the target of Republican Presidential candidates' sound bites. This has never happened before. This is terrific. They are trying to steal Ron Paul's favorite issue. I say more power to them. Come one, come all! Pile on!

Milton Friedman made this line famous: "Inflation is always and everywhere a monetary phenomenon." He was correct. This insight has been resisted by Keynesian economists from day one, but the Keynesians find that the phrase has gotten into the thinking of millions of voters. Keynesians today are calling for larger deficits and Federal Reserve accommodation, but that is because consumer prices are rising very slowly. If prices were rising at 20% per annum, the Keynesians would find it difficult to conceal the source of the problem: the Federal Open Market Committee. The FOMC could not hide.

This is the central political fact facing the FED today: "It can run, but it can't hide."

Bureaucrats want to avoid blame. This is their #1 concern. Second is to increase the number of subordinates, in quest of a promotion. Third is to increase the bureaucracy's funding. But the #1 concern is to avoid blame.

Bernanke will not be able to avoid blame for hyperinflation. He will therefore not adopt policies that produce it.

The FED could be nationalized. Congress could take over. Then all bets are off. But if we are talking about the existing Federal Reserve, with government-appointed academic economists visibly in charge and the privately owned and operated FOMC making the decisions – which will favor large banks – there will be no hyperinflation.

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