Why the US President Loves Inflation: Three Fallacies

The third fallacy is the nominal-GDP confusion. Rising prices lift nominal output, which can be mistaken for growth. A president can point to a larger economy measured in dollars and claim credit. The Mises Institute warns that real output – the actual goods and services produced – may be stagnant or declining. This confusion leads to policy that stokes inflation rather than genuine prosperity.

For bond markets, the risk is straightforward. The Mises analysis implies that inflation erodes the real return on fixed-income assets. A president who prefers inflation would be unlikely to resist calling for lower rates. If the president's stated affection translates into policy pressure on the Federal Reserve, long-term Treasuries face lower real yields. The yield curve would steepen as inflation expectations rise relative to short-term rates.

Gold has already moved higher this year, a typical response to expectations of currency debasement. The dollar has weakened against a basket of major currencies, reflecting some of that same expectation. A scenario of Fed accommodation would likely push the dollar lower, reinforcing the inflationary cycle through higher import prices and squeezing consumers further. Gold profile offers more on the metal's behavior during debasement.

The Mises Institute argues that the only sustainable path is a return to sound money and price stability. Until that policy shift occurs, the president's love of inflation remains a source of risk for anyone holding dollars or dollar-denominated fixed-income assets.