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Ten Reasons To Condemn Inflation
Submitted by Andreas Marquart via the Ludwig von Mises Institute,
Inflation, defined as an expansion of the supply of unbacked money, is an elementary evil, always and everywhere that it occurs. It is the ignored and core cause of numerous problems in the economy and in society, including:
1. Inflation Causes Booms and Busts
Increasing the money supply that involves the granting of more credit means that new money is created by credit that is not covered by savings. This causes interest rates to fall more than would be the case without an expansion of the money supply. The result is an artificial economic boom, which politicians and the general public initially welcome. Investments are triggered that would not have been carried out if the invested capital had to be saved up first, prior to such investments. Therefore, there are insufficient resources available to bring all the projects thus begun to completion. In addition, resources — which are by their very nature scarce — are not brought to bear where they are most needed — in the most urgent projects. When interest rates climb again, the malinvestment comes to light, and a crisis — a bust — results. To overcome the bust, the central bank then reduces the interest rate again. A crisis that would clean things up is thus not allowed to happen, because it is politically undesirable.
2. Inflation Redistributes Wealth and Purchasing Power
An un-backed expansion of the money supply causes the prices of goods and services to rise. The parties who first receive the newly created money profit. They are able to make purchases at goods prices that still have not risen, whereas the later recipients of the money will only enjoy the benefits of the new money when the goods prices have already risen. They are put at a disadvantage and lose relative to the initial recipients of the cash. In addition, some market participants don’t gain anything from the newly created money. The initial recipients are the banks, the state, and large enterprises. This effect also occurs when the price of goods remains stable due to money expansion and would otherwise have fallen without an expansion of the money supply. In this instance, inflation is particularly nefarious.
3. Inflation Prevents the Price of Goods From Falling
Higher productivity and a strengthened division of labor in a national economy allow the quantity of produced goods and services to rise. If the money supply were to remain unchanged, or would rise or to a lesser extent than the quantity of goods, this would led to a falling overall price level. Expanding the money supply prevents such price decreases. The European Central Bank (ECB) has defined a reference value by which the most broadly defined money supply, M3, should ideally rise. This reference value is at present about 4.5 percent per year. The argument that is used is to always maintain price stability. Deflation, which is incorrectly interpreted as a sinking price of goods, is said to be broadly damaging to the economy. Broad swaths of the population are thus prevented from taking part in a just share of productivity increases and a strengthened (international) division of labor.
4. Inflation Causes the Welfare State to Grow
The expansion of the money allows the state to go into debt more easily and at lower interest rates than would be the case without monetary expansion. Due to that, expenditures can be financed that otherwise have to be financed by raising taxes. Politicians make use of this, particularly before elections. They thus can promise “benefits” that otherwise would not be able to be financed. People willingly take the bait and want to be the first in line, not knowing, or repressing the fact that they themselves are the ones financing the “big banquet.”
5. Inflation Destroys Families
No one has formulated this better than the economist and philosopher Hans-Hermann Hoppe in Democracy: The God That Failed, writing:
Every form of government welfare — the compulsory wealth or income transfer from “haves” to “have-nots” — lowers the value of a person’s membership in an extended family-household system as a social system of mutual cooperation and help and assistance. Marriage loses value. For parents, the value and importance of a “good” upbringing (education) of their own children is reduced. Correspondingly, for children, less value will be attached and less respect paid to their own parents.
6. Inflation Corrupts People
Placed before the choice of allowing a crisis that would clean things up after a boom and kicking the can down the road, the majority of the populace accepts the latter option. The debt of most market participants is too high to shoulder the burdens of a deflationary crisis. The fear of the loss of one’s job is just too much. Many people are also too dependent on state money transfers, state subsidies, and/or state projects.
7. Inflation Expands the State Bureaucracy
Every recession that comes after a boom makes bad investments evident. The citizens demand that the state “make things right.” The state is called on to intervene and fix things. Politicians gladly take up this call and can justify their positions in that way. But every intervention results in further state intervention and creates a veritable “thicket” of interventions. In the end, state regulations penetrate and strangle the economy and society in the form of a multiplicity of laws and regulations.
8. Inflation Makes People Materialistic, Envious, and Egotistical
Inflation reduces the purchasing power of incomes and of assets that are saved up. Thus, for example, when people invest their assets, a lot of time has to be used to compensate for the loss caused by the expansion of the money supply. This only happens with great time and effort, but mostly doesn’t. Purchasing power falls through people’s fingers like sand. Everyone literally chases every cent, envies their neighbor and his possessions, not knowing that the neighbor himself is up to his neck in debt. Charity and the willingness to help out falls among people, who are themselves just barely making it. Meanwhile, the sentiment “we already pay enough in taxes, so the state should do the charity work,” becomes more common.
9. Inflation Depresses People
Particularly for those who don’t earn much, inflation makes it increasingly hard or even impossible to accrue assets by saving. Prices, for example for energy and groceries, climb continually. Climbing the social ladder becomes harder and harder. Purchases become, for many, only possible by taking on credit. And paying off the credit becomes more and more of a burden. People are frustrated by their often hopeless situation. Frequently, this path leads to heavy debt and bankruptcy.
10. Inflation Leads to Waste and (Natural) Resources Becoming More Expensive
Resources and time are scarce. The artificial boom caused by inflation leads to investments that otherwise would not occur, or would occur at a later time. If projects have to be interrupted due to insufficient savings and/or rising interest rates, then scarce resources are used up, and — in many instances — can never be recovered. This means that more natural resources are used up than would be the case otherwise. The price of raw materials will tend to rise. In addition, the environment is damaged unnecessarily. Also, for inflation-induced infrastructure projects for which there is no real need, when viewed realistically, the environment is unnecessarily burdened.
* * *
But apart from that, it's what we are told every day by the status quo that is needed to save us all...
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Off topic but important as fuck.
http://www.theguardian.com/world/2014/sep/09/us-air-marshal-stabbed-syri...
Light up the "prick" puns
Listen. I don't see WTF is so fucking important?
I'm sure there are parties in certain corners of the world regarding the air marshall. But what ever.
This Ebola outbreak was engineered by the San Diego company that created the new vaccine back in March 2014. "Gotta pay for the R&D costs"...
Whatever,,,, what about the fucking purple elephants...
Keep your eye on those fuckers!
So... no word on the attacker, no word on possession of the syringe, no real info at all?
If the "inflation" was replaced with "excessive monetary creation" as in a fiat system, I'd be happy to go along therewith.
And of course, if one has a fiat system, excess printing is indeed a function of debased morals and ethics.
I think 'lack of' may be a better fit than 'debased'
Could be wrong. it does happen.
Occasionally ;-)
When I graduated high school, gas was 25 cents a gallon, quarters were 90% silver then.
Today, that same silver quarter buys me a gallon of gas. There is no inflation in real money,
only in that phoney fiat crap that they are passing off as money today.
When I was a kid, my grandparents used to put their pre-64 stuff in bags in the basement. They were depression-era people. I didn't quite understand why they did weird stuff like that. I remember thinking that living through the depression must have been pretty horrible for people to have come through it so twisted and scared for the rest of their lives.
Now that silver is mine, every damned coin they ever threw in the bag. And it isn't going ANYWHERE. In fact, it's being added to. Slowly, a little here, a little there. No IRS agent will ever see this inter-generational store of wealth show up in their files. It's there "just in case". If I don't need it, the next generation gets it. Free and clear, no taxes due.
In a completetly non-inflationary monetary environment, what is the cost of money? I'm not being facetious, I'm just wondering how lending/credit would work and/or if it could even exist.
It would depend on the prospects for ROI. If it is a good economy (that is, a free market one) then rates would be low as the money would be strong, and savings plentiful, and the rates would be lower but savers would still do well because the real value of that money is increasing.
There still would be lending/credit. Lenders wouldn't have backstops like TARP and QE, though, so they'd do their DD before lending. It wouldn't be as speculative/leveraged economy as it is now, because money would actually be valued, unlike status quo where borrowing rates are zero. When something is valued it is not treated carelessly.
Makes sense. So these are unprecedented times then, we have record low interest rates on loans and a depreciating currency. In theory without a backstop, Banks would never see a return on their money If I were a gambling man I'd want to borrow their fiat to buy certain undervalued assets.
Exactly. The low rates being conjured via bond buying by the CBs is to give the illusion of a bid under the dollar. This is why TLT and SPy are joined at the hip, positively correlated. Rates will rise not due to growth going up, but due to foreigners wising up and demanding higher interest commensurate with the risk of holding US fiat.
The only 'demand' left for USD is that so much debt is denominated in it, so if/when margin calls come again, people have to liquidate and get into it. But this is not real demand as in desiring the currency. This is a usurious system as more debt is being perpetually issued. The currency is debt-based; a liability; a NOTE.
Low rates should only be the case when the money is strong and the supply of savings is a lot so there is liberated capital put aside for future investment by entrepreneurs. There is no savings of course in America for many, so the Fed prints 'capital' and tries to give the illusion of a good investment environment when the reality is that savings are actual foregone consumption; real resources that are put aside for investment, not consumption. So the construction folks and other businesses get in on the cheap credit, but it is all unwarranted, as there is no legitimate purchasing power/REAL DEMAND out there to buy all this stuff being built up, so we get gluts of some sectors, like housing, and it needs to get liquidated. The Fed didn't let this run its course, though, after the crash, as they reflated.
They are in the end game, printing money to keep a 'bid' under said money. And obviously rates cannot go up due to the debt and unfunded liabilities.
Harbanger,
In an completely non-inflationary monetary evironment, the supply of money would be fixed. Money would become more and more valuable as the population increased, because fewer people would have any. I suppose lending / credit could exist if the loan was made with real money, i.e., I give you an actual $100 as a loan rather than giving you a credit card as a loan.
That's the main reason why a fractional reserve system is NOT a bad thing (reserve being the key term). For the entire history of the country, we've had population growth and economic growth. If the money supply didn't grow to accomodate that, we'd be stuck in a 1800s standard of living.
This article was good, and kudos to the Tyler that wrote it, but it leaves out an important element to the topic: growth. Economic growth and inflation (increase in the money supply) go together. There are booms and busts, but that is a normal part of the economic cycle.
The problem is that in 2007 we hit the wall of growth, and now it's over, maybe forever. Deflation (decrease in the money supply) will take over, and we'll go backwards in terms of standard of living. That's what everyone is so panicked about. There will still be booms and busts, because that will still be a normal part of the economic cycle.
Right now they are hiding the deflation, because they have everyone convinced (except me and a handful of others) that the definition of deflation is lower prices. It isn't. Deflation should LEAD to lower prices, but that is not the definition.
For example, if someone defaults on a second mortgage and that loan gets written off, that is a decrease in the money supply. It is an asset on someone's books that went POOF, because it won't get paid back. But it won't necessarily cause the house price to go down, because it was imaginary money in the first place. There are mega trillions out there right now going POOF all over the world. It's being hidden because much of that fake money was put in the form of future promises (i.e., pensions) that haven't come due yet.
JMHO.
Threadjack Alert, sorry. Does anyone know why ZH has not had an article on the CDC whistleblower? Could be huge. Again sorry.
What? The thing about the link (or lack thereof) between vaccines and autism? Or did I miss something?
Link, please.
http://www.prohealth.com/library/showarticle.cfm?libid=19191
Many others covering it. But no MSM yet. This would be huge.
Listen. It's not even remotely financial and there certainly aren't any cartoons there. So.....
Ebola is financial? We're talking about two diseases here. CDC committing fraud would be a huge story and would just add to the mistrust of the oligarchs who rule us.
Ebola has a greater potential to cause massive disruptions in global and domestic commerce. Even a simple rumor of an infected individual possibly roaming in a heavily populated area could cause the consumers to flee and vital services to halt. While I have a great interest in your topic and think it vitally relevant to society, it doesn't have as much potential to disrupt the economy. The info you site is out there and can be uncovered by those who seek it.
I was a questioning parent and my children benefited from my skepticism. The sad thing is, many blindly do as the white coated ones decree and are unwilling to challenge authority. There is the crux of the problem.
Miffed;-)
One thing about ZH is screaming your head off on a subject over and over in an OT manner never goes down well.
Don't get me wrong, I would say that the share prices of companies making (mercury filled) vaccines of questionable efficacy for profit, makes it just another example of the financial scams most people are unaware of. It's one of a very long list.
As for mistrust... I don't need any additions!
Plus you can find 42,000 ebola threads over on GLP. Don't get me wrong, I love that website, but I come here for finanical stuff.
These damn conspiracy facts just won't stop! It's an outrage!
There was an uproar recently due to the governments coercive actions towards the scientific community.
http://winnipeg.ctvnews.ca/scientists-protest-federal-government-muzzlin...
Sadly, as the way of many a protest lately, a splash of media and a couple of uncomfortable days is the only payoff.
Then down the memory hole it goes.
Scientists are not being "muzzled" or coerced. Funds are being cut or reallocated is the real story.
This is rent seeking by 'scientists' who would prefer the government fund their research. Oh, but wearing lab coats to the protest--most of these "scientists" are social scientists, by the way--is a nice touch. Effective political theatre. They should have waved giant test-tubes and carried enormous beakers filled with kool-aid to represent the blood of oppressed resesarchers.
I would prefer that the government fund no research at all. There. Now the game is fair.
I must agree. Well said. I have heard some protest government funding makes research unbiased. After clearing the bile from my throat, I tell them from my experience it makes it even more so. Unbiased research is an oxymoron. You are left with sifting through papers hoping for the least.
Miffed;-)
It is not a 2% inflation which sucks, it is a 2% inflation combined with a zero% return on cash.
Balance is important and like so many things in life when it comes to economic policy it is very important to balance the markets reward when it comes to savings and debt. Savings plays an important role in the economy and has been shortchanged, this will come back to haunt us.
The idea of being frugal and living within our means has not been given due credit, living by increasing debt is far too acceptable. When we find it necessary to discuss savings we are back to basics and it is a sign we have strayed far off course in our economic policy. More on this subject in the article below.
http://brucewilds.blogspot.com/2014/09/savings-and-role-it-plays-in-econ...
Inflation is mankind's mechanism to control our natural system of commerce. Deflation is that system attempting to rebalance itself.
And yes it makes me both envious, and depressed. Envious in the respect that if any one of these billion dollar bitches thinks they work harder, or earn more keep then I, they are stunned, and officially challenged to trade places. It will only be for a month.
It's depressing because within the few short years I have have become interested in this situation I have reached the undeniable conclusion that inflation is disruptive to our natural healthy environment. As a society we are intellectually beyond this madness, and are sowing the seeds of our own destruction.
This shit must stop.
Here in the Deflationists Lounge we condemn inflation every day but next week it will probably be 11 reasons to condemn inflation.
Ask journalism how much it got for its soul.
http://patrick.net/forum/?p=1223928
yea but deflation sucks! hhahahaa.h
There are only three choices for the US to save itself from economic collapse due to high debt.
Default.
Hyper-inflation.
Devalue the dollar.
All choices will lead to much pain for the entire world. What will follow is anything including the chance of global war.
Debt forgiveness for everyone on Earth! Yay!
homebody,
We already had the hyperinflation over the past 40+ years. It didn't save the US from economic collapse, it just delayed it.
We're IN the economic collapse now.
There's no answer to this problem on a large scale. Focus on yourself and your family and community if you have one. We'll be going backwards from now on (economically speaking.....hell, socially, too, can't you see it?), and those of you who get out of denial right now stand the best chance of making it. :)
The stupid politicians keep repeating the BS that an expanded economy with more employment will be able to pay off 18 tril in debt. Even if the jobs came back to the US (which is a dream in itself) the debt is beyond what the country can produce.
homebody,
See my post above. There will not be an expanded economy. Not in the sense of never-ending growth that the country has been addicted to for the past 40 (maybe 70) years.
Our debt is a problem, no doubt about it. But keep in mind that the rest of the world has WAY more debt than gets reported. A lot of it is in the form of OUR military aid, foreign aid, humanitarian aid, charity, etc. We're not over a barrel just yet.
I agree that we have been boiling the frog for years but there may be a rapid conclusion if the debt dominos start to fall in country after country. You are right about preparing and self-sufficiency - I have paid for the land, house, bullets, beans, garden, tools , tractor, fuel, bandaids, root cellar, etc however I still am having trouble developing a trustworthy network of neighbors as many do not see the writing on the wall.
The SOURCE of inflation is the same as the SOURCE of the privatized public "money" supply made out of nothing as debts, which fraud the government enforces. Despite how correct the points made in the article above may well be, mostly they are relatively trivial compared to the basic problem that government is the biggest form of organized crime, controlled by the best organized gang of criminals, which system has succeeded in reducing the vast majority of people to Zombie Sheeple.
From a sublime point of view, one would think that allowing private banks to make the public "money" supply out of nothing as debts should alarm people. Clearly, many of the runaway problems in the political economy can be traced to that SOURCE of enforced frauds. Furthermore, from a sublime point of view, one would think that it should be obvious to almost everyone that private banks making the public "money" supply out of nothing as debts is obviously an enforced fraud, because making something out of nothing violates the most basic laws of nature. However, in the real world, that is NOT the case. Rather, the overwhelming vast majority of people ARE Zombie Sheeple, who are not interested in thinking about the basic problem of the privatized making of the public "money" out of nothing.
Too much "money" made out of nothing manifests as inflation, while too little "money" made out of nothing, or too much "money" disappearing back to nothing, manifests as deflation. Both problems trace back to the SOURCE of that problem which is the legalized counterfeiting of the public "money" supply out of nothing as debts, which fraud by private banks was not only legalized by the governments, but also enforced by the governments demanding taxes be paid in that form of fiat "money," as well as legislating legal tender laws, which similarly enforce that fraud, by requiring that everyone must operate within that fundamentally fraudulent financial accounting system.
HOWEVER, when one looks deeper into the history of that, it is clear that the funding of the political processes became totally triumphant in creating the situation wherein the vast majority of people have adapted to living inside of the established systems of enforced frauds for generation after generation, to the degree that it is practically pointless to bother to read about how the monetary system really works, or to comment on that, because knowing about how utterly INSANE and irrational the established enforced frauds are makes no practical difference to them continuing to still automatically get worse, faster.
After one better understands how INSANE the established "money" system actually is, then it turns out that attempting to fix that problem is practically impossible, to the degree that it is a waste of time to even bother to work upon. The only things that work are taking advantage of how INSANE those systems are, by operating in ways which then become even more INSANE, by taking advantage of how those legalized financial frauds are enforced (or how the laws against the few remaining frauds which were not yet legalized are not enforced), in order to be able to drive society as a whole to commit collective suicide, while the individuals doing that temporarily make more of that "money" within those runaway social INSANITIES.
Beyond driving social polarization (by the inflation due to people who have the power to make "money" out of nothing developing every possible excuse to do more of that, while those who are further away from the SOURCE of that "money" made out of nothing suffer worse, in proportion to how far away from that SOURCE they are), this article above correctly concluded with the most important point:
"The price of raw materials will tend to rise. In addition, the environment is damaged unnecessarily. Also, for inflation-induced infrastructure projects for which there is no real need, when viewed realistically, the environment is unnecessarily burdened."
It became obvious to me several decades ago that the monetary systems were INSANE, due to the ways that the economy tended to deliberately ignore the environmental ecology. The basic enforced fraud of making "money" out of nothing as debts was obviously driving the destruction of the natural world to get worse, faster, while those doing that were becoming more wealthy and powerful, within that system of enforced frauds, which depended upon society as a whole continuing to behave in ways which were INSANE.
After spending several decades learning about that problem, and doing my best to try to mitigate how bad it was, and perhaps recover from that, I have gradually been forced to face the FACTS that I was totally wasting my time to attempt to resist the SOURCE of that social INSANITY. The overwhelming vast majority of people ARE Zombie Sheeple, and there are no good reasons to expect that is going to change, other than by continuing to also get worse, faster. Meanwhile, those who are able to take the most advantage out of the power to create the public "money" supply out of nothing as debts are constantly becoming more wealthy and powerful within that system, despite that system driving irreconcilable social polarization, and even worse irreparable destruction of the natural world.
The runaway triumph of controlled civilization by backing up lies with violence, which has manifested as the monetary system becoming enforced frauds, has become terminally screwed up, to the degree that our society is now irreversibly sick and irredeemably INSANE. Reading articles like the one above merely underscores and emphasized all of the ways that is happening ... while nothing that I am aware of has any hope in hell of achieving anything which is politically possible to practically change that.
The only thing that personally works is taking advantage of how the SOURCE of the public "money" supply operates as INSANE ENFORCED FRAUDS, while attempting to resist that runaway madness is clearly a futile waste of time. That is my unavoidable conclusion after learning about these issues for several decades, and doing everything I could think of as ways to attempt to fix those problems, none of which worked, other than again and again demonstrating the degree to which our entire civilization is completely crazy and corrupt, because everything is based on being able to back up legalized lies with legalized violence, and those who benefit from being able to do that have every possible advantage to continue to do that, while those who attempt to resist that suffer from every possible disadvantage when attempting to resist that, since the role of money in the political processes has made government of the money, for the money, by the money become totally triumphant, which means that the established government is INSANE, because the SOURCE of the public "money" supply is already totally INSANE, while it is always possible to continue to fool enough of the people enough of the time, so that basic common sense understanding of the laws of nature plays no public role in the ways that society is actually dominated by systems of enforced frauds, which drive that society to become more madly self-destructive every day ...
"Ten Reasons To Condemn Inflation" all track back to the SOURCE of that problem which is the enforced frauds of private banks making the public "money" supply out of nothing as debts, within which situation those who enjoy that privilege to legally counterfeit the public "money" supply always find more excuses to make more of that kind of "money," which drives relentless inflation to be the main overall trend. HOWEVER, the more one understand that, the worse it gets, because the more one learns about the nature of that problem the more obvious it becomes that there are NO good solutions which can actually be implemented. The established systems are INSANE, and they are going to madly destroy themselves, while there is nothing which is practically possible to prevent that from happening.
Knowing what I know now, I WISH that I had never bothered to try to stop the runway enforced frauds that were driving social polarization, and the destruction of the natural world. Rather, I WISH that I had realized that I would be more successful in my own personal little life if I had embraced that INSANITY, and become one of the INSANE BANKSTERS, taking maximum personal advantage of killing the society that I was living in, while that society was killing the planet it was living on. ... Ah, but there was the rub ... I was never able to indulge myself in that way. Instead, I keep on actually wasting my time trying to understand the problems better, in order to perhaps do something to mitigate how bad those problems were.
The only actually useful "actionable intelligence" is directed towards taking advantage of how the established systems are INSANE, in order to drive them to become even more INSANE, while indulging in a little of the personal benefit which can be derived from marginally increasing how our political economy is madly destroying itself. In that context, the most sublimely PARADOXICALLY INSANE thing is to attempt to resist the ways that our society is INSANE, because it is controlled by enforced frauds, through systems of legalized lies, backed by legalized violence, in which context the vast majority of people continue to act like incompetent political idiots, while the banksters and their buddies continue to become more wealthy and more politically powerful, by constantly leveraging up and up their ability to legally counterfeit the public "money" supply, in ways which then enable them to even more dominate the political processes, and every other social institution, so that all of those combined constantly become more INSANE, inside of their vicious spirals.
Inside of a society which has become as completely INSANE as our society actually is, where the public "money" supply has already become more than 99% based on enforced frauds, to attempt to resist that INSANITY is also obviously practically INSANE, although that still makes theoretical sense. As far as I can tell, there is nothing which can be actually done but watch and wait as the madness of privatized fiat "money" made out of nothing as debts, which frauds are enforced by governments, gets madder and madder, until it drives itself through psychotic breakdowns and collapses into chaos. Realistically speaking, there is no god damn point to bothering to learn about how INSANE the monetary system and political economy actually are, except if one is going to take advantage of that "actionable intelligence" in order to drive it to become even MOAR INSANE! Attempting to try to persuade the established political systems to become saner and more rational is paradoxically nothing but itself an INSANE thing to try to do, because the established systems are way TOO INSANE to be able to do that.
It only make sense to the ones that live for today - rich, wasteful, selfish, greedy, immoral, unethical, sociopaths to maintain the fraud. Unfortunately there are so many that embrace or aspire to live this lifestyle that this system can not be torn down. The downward spiral will continue to subject more of the population to poverty until the system collapses.
The appearance of wages being cut during downturns would not be acceptable so inflate away so that workers pay more for everything but dont see a cut in pay. Hopefully they wont notice or complain about the real cut in earning power. The Dems are banking on their public school trained constituents to buy it.
Why inflation is good according to misguided leftist economists:"Second, we have the wealth effect. People tend to feel wealthier when the paper value of their assets is higher, and they tend to spend more. This may be an especially powerful driver of consumption when homeowners can easily use home equity loans to fund purchases of consumer goods. A number of studies have found that wealth in the form of home equity is a larger driver of consumer spending than other forms of wealth." "
I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large percentage of wealth into intangible products or goods. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.
The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.
It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years. More in the article below.
http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos....
The only solution is for all money creation to be dependent upon an underlying real asset on a one for one basis, no more fractional reserve nonsense. This could be gold, silver, grains, land, cattle, etc. No longer will the promise to repay be the sole criteria for the creation of the money which will then immediately be used to chase real assets thus leading to inflation in the first place. Real money backed by real assets leads to zero inflation throughout the history of the world's economies.
100 thumbs up RealAssets but that would mean the currency manipulators would be out of business!!!! Probably would start world war before giving up control.
Inflation is requisite for the aggregate supply/ aggregate demand model of the economy. This Keynesian way of looking at the economy sees inflation as a driver of the all important demand. Under this regime, inflation fixes the problem of "sticky wages," as well as creates a strong incentive to spend today rather than see money one has worked hard for evaporate.
If we were to take Schumpeter's model of economic growth we can see that inflation is actually a killer of economic growth. Schumpeter's model is based on creative destruction, or in other words... new ideas replacing old ones. Inflation's pernicious effect is to stifle the accumulation of the capital necessary for entrepreneurs to start their "destabilizing" businesses.
But then again, didn't Marx, and by extension the new Marxists, progressives, hate accumulation?