Rush Limbaugh Continues Long Right Wing Tradition Of Fearmongering Over Inflation
Blog ››› ››› DAVID SHERE
The Federal Reserve announced on September 13 that it is taking new measures commonly referred to as quantitative easing to boost employment and stimulate the economy. Immediately following the announcement, Rush Limbaugh told his radio show listeners that this means the United States will eventually turn into Zimbabwe.
Limbaugh claimed that the Fed's actions mean "we're basically printing more money" and "printing money equals inflation, equals Zimbabwe -- third world." This is a common response from the right wing media whenever the Fed moves to boost the economy. But the idea that inflation in the United States will ever explode into unmanageable levels is farfetched.
To understand what Limbaugh is saying, think about what matters for your economic situation: Ultimately, what's important is not the amount printed on the pieces of paper in your pocket; it's what the money can buy. The idea that Limbaugh is trying to get across -- which is false -- is that by "printing money," the Federal Reserve is debasing the currency -- making each dollar worth less. But if the Fed, for example, doubled the amount of dollars in circulation in the world, all that would happen is that prices would in turn double. So instead of your morning coffee costing $2, it would cost $4, because each dollar would only have half the value it did before. That's what Limbaugh's getting at when he said "printing money equals inflation."
But he's wrong. The fact is that the Fed has already "printed" $2.3 trillion since 2008. (Actually, it doesn't physically print anything. Imagine selling some of your Facebook stock to the bank, and the bank pays you by dropping money straight into your account. That's what the Fed does -- it buy bonds from banks, and drops money in their accounts.) But it hasn't resulted in runaway inflation. This chart shows how fast prices have risen over the previous year going back to 1947, with a black line added at zero to make clear how historically low inflation currently is:
As economist Mark Thoma wrote several weeks ago, "it appears the biggest worries about further easing -- inflation and market disruption - are unfounded."
But little things like history and evidence have no bearing on the right wing's thought leaders. Fox News contributor Sarah Palin has predicted that the previous rounds of bond buying would lead to inflation.
After the Fed's announcement, she took to Facebook to again denounce the Fed's actions:
As predicted, QE3 is upon us. Is it any wonder that the dollar is down against major currencies? This temporary, artificial economic "stimulus" bought at the expense of high inflation is no substitute for a stable currency and genuine long-term economic recovery. This is what happens when big government centralized planners try to "plan" our economy. President Obama is no doubt happy, though, that this latest sugar fix comes 53 days before the election.
As we've established, the substance of this critique is flawed. But what does Limbaugh mean when he says we'll turn into Zimbabwe?
Go back to your $2 cup of coffee. If the value of a dollar falls and your cup of coffee goes from $2 to $4, that's inflation. If the value of a dollar falls and your cup of coffee goes from $2 to $200,000, that's hyperinflation, and it's a debilitating economic condition that the African nation of Zimbabwe experienced in the mid-2000s.
According to The New York Times, Zimbabwe had an unemployment rate of around 80 percent and inflation, as of May 2006, was approaching 1000 percent. The Times explained:
[P]rinting too many worthless dollars is in part what got Zimbabwe into this mess to begin with. Zimbabwe fell into hyperinflation after the government began seizing commercial farms in about 2000. Foreign investors fled, manufacturing ground to a halt, goods and foreign currency needed to buy imports fell into short supply and prices shot up.
Annual inflation in the United States today is 1.7 percent.
It hasn't risen above 7 percent in more than two decades