WASHINGTON, DC – MAY 22: Kevin Warsh (L) shakes hands with U.S. President Donald Trump after being sworn in as the new Chairman of the Federal Reserve in the East Room of the White House on May 22, 2026 in Washington, DC. Warsh succeeds Jerome Powell, who served as Chair for eight years. (Photo by Roberto Schmidt/Getty Images)
Getty Images
In reality, a falling price implies a rising price and vice versa. Economics is about tradeoffs.
Which means that if the cost of Honeycrisp apples increases because they’re revealed as a cure for baldness, the latter doesn’t signal “inflation” as much as it signals a shift away from other market goods and services on the path to lower prices for them. If you’re paying more for one market good, you have fewer dollars for others.
Just the same, when global supply chains dense with people and machines make it possible for all of us to have supercomputers in our pockets the cost of which would have been measured in the millions not terribly long ago, the lower price for supercomputers is matched by rising prices for hotel suites, Knicks tickets, K-12 private school tuition, college tuition, and all manner of other finite luxuries.
The point here is that the so-called “price level” is always and everywhere in balance. Rising prices yet again are a sign of falling prices, while falling prices (including falling prices for former luxuries) invariably reveal themselves in soaring prices for other goods. If you’re still confused, check out the cost of a room at the Hotel Bel-Air in 1996 versus 2026. That the latter is exponentially higher alongside cheaper computers, phones, long distance, and countless other market goods is a natural, and rather bullish market phenomenon.
Unfortunately, the seemingly erratic nature of market prices is increasingly glossed over by commentators with a free market bent. The Wall Street Journal’s editorial page continues to promote the narrative that successful Federal Reserve chairs achieve success by “maintaining stable prices.” Except that they can do no such thing.
If we ignore that market prices are the remarkably sophisticated effect of billions of hands and machines the world over, and that the Fed has near zero control over, we can’t ignore that market prices are by their very description the definition of erratic. While the Journal lauds Fed Chair Warsh for having made “price stability a lodestar of his monetary method,” never explained by the editorial page, the economists it hosts, or Warsh himself, is how the Fed could pull off such an impossible feat.
The answer might be that dollar-price stability is something the Fed can pursue, but the dollar’s exchange value isn’t now nor has it ever been part of the Fed’s policy portfolio.
Still, for fun let’s assume what’s not true, that the Fed could make dollar-price stability its own mandate. If so, watch investment soar as precious wealth sunk in inflation hedges emerges to pursue market returns rooted in real progress. If so, watch the prices of all manner of necessities and luxuries plummet, only for the prices of other, more finite market goods to rise to even greater heights.
The point of this is to make the basic point that even dollar-price stability that’s not part of the Fed’s portfolio as is would never result in the impossible notion of “price stability.” If anything, dollar-price stability would result in prices that are quite a bit more erratic due to price-compressing investment that would most certainly result in price surges elsewhere in the economy.
The simple truth is that there’s no such thing as price stability. Thank goodness for that as stasis is the definition of economic decline, or worse. Just the same, the so-called “price level” (whatever that is) is always stable, and that’s true regardless of what the Fed does.