Fed Chairman Kevin Warsh should highlight that market prices are a global endeavor, rendering the Fed largely powerless against what economists mistakenly call inflation. Products like the iPhone are cheap due to globalized production and ingenuity, not monetary policy. Companies like Apple, by spreading production worldwide, are the true drivers of price dynamics, pushing costs down. AI will further boost productivity and create abundance, yet also naturally increase prices for certain services due to rising wealth, a trend beyond the Fed's control. The Fed's influence on credit and the economy is minimal; credit is produced by real-world productivity, not central bank fiddling. True inflation is a monetary unit shrinkage, which the Fed cannot fight, making traditional economic theories like the Phillips Curve obsolete. Back to reality, and assuming an AI-driven surge in productivity, credit flows into the United States in search of the latter will soar without regard to Fed fiddling. Never forget that credit is produced by lender and borrower, the lender through excess resources born of rising production, and the borrower as an effect of expected productivity increases that rate credit (most often equity, but sometimes the loan type) in rising amounts. Warsh can add that some appreciate his disdain for the Phillips Curve, as they should, but that he had to establish that disdain ahead of productivity leaps that have the potential to make the past appear slow by comparison. Just as important, he should add that no amount of Fed intervention can shrink credit as is. See the previous paragraph. Since it’s produced, and measured in dollars, short of the productive placing their dollars in coffee cans, their surplus will be loaned and invested. Credit is never idle. Lastly, Warsh should inform the uninformed that inflation is a shrinkage of the monetary unit, higher prices the occasional effect. He should then add that the dollar’s exchange value has never been part of the Fed’s portfolio, so the Fed really can’t fight inflation. To believe otherwise is to pair a discredited Phillips Curve with discredited Keynesian theory that falsely says money saved is money removed from the economy.
