I’m glad Parker understands at least a little about the nature of inflation. Since most people don’t, here’s a short primer:
Contrary to popular error, inflation is not rising prices, it is a money supply increase at a rate unsupported by economic growth, which in turn is the cause of rising prices. The distinction is crucial because confusing cause and effect hides the real culprit, namely government manipulation of the money supply.
Government can get money in only three ways: borrowing, taxing, or legal counterfeiting. Borrowing must be paid back eventually so it only delays the issue. Taxing is unpopular, causing politicians to get voted out of office if not strung up from lampposts.
So the method governments have resorted to ever since the invention of money is to create more money. Whether it’s Henry VIII replacing expensive silver pennies with cheap copper, FDR going off the gold standard, or the U.S. Mint in 1965 replacing silver dimes and quarters with cheap metal sandwiches, they are all methods of allowing the government to create money essentially out of thin air. When the government does it they call it monetary policy; if you or I did it they would call it counterfeiting.
In the modern economy the main method is to jiggle central bank interest rates and banking regulations, allowing the sudden creation of more credit than the economy would properly justify. But the simplest method of all is just to run the printing presses day and night, and it is very quickly coming to that with the Fed’s so-called “infinite balance sheet”.
The result will be rapidly rising prices, but like back in the ’70s, it will befuddle the economists who thought that the economy would benefit, resulting instead in both price inflation and economic stagnation for years.
The solution is so far in the future that it will take a generation or two to die off first before it can be implemented, but nothing else will do: the separation of the Government and the Economy, in exactly the same way and for the same reasons as separation of Church and State. When such separations are not maintained, it leads to mutual corruption.
Hey people, these ideas are not new. They’ve been out there for decades. Just read some Austrian School economics like Ludwig von Mises. But even better, for the moral foundations for a free economy, read all the Ayn Rand you can lay your hands on.
KittyMom755 almost 16 years ago
…to keep up with the inflation.
attyush almost 16 years ago
Love him or hate him, I doubt anyone else is working harder than Hank Paulson.
pschearer Premium Member almost 16 years ago
I’m glad Parker understands at least a little about the nature of inflation. Since most people don’t, here’s a short primer:
Contrary to popular error, inflation is not rising prices, it is a money supply increase at a rate unsupported by economic growth, which in turn is the cause of rising prices. The distinction is crucial because confusing cause and effect hides the real culprit, namely government manipulation of the money supply.
Government can get money in only three ways: borrowing, taxing, or legal counterfeiting. Borrowing must be paid back eventually so it only delays the issue. Taxing is unpopular, causing politicians to get voted out of office if not strung up from lampposts.
So the method governments have resorted to ever since the invention of money is to create more money. Whether it’s Henry VIII replacing expensive silver pennies with cheap copper, FDR going off the gold standard, or the U.S. Mint in 1965 replacing silver dimes and quarters with cheap metal sandwiches, they are all methods of allowing the government to create money essentially out of thin air. When the government does it they call it monetary policy; if you or I did it they would call it counterfeiting.
In the modern economy the main method is to jiggle central bank interest rates and banking regulations, allowing the sudden creation of more credit than the economy would properly justify. But the simplest method of all is just to run the printing presses day and night, and it is very quickly coming to that with the Fed’s so-called “infinite balance sheet”.
The result will be rapidly rising prices, but like back in the ’70s, it will befuddle the economists who thought that the economy would benefit, resulting instead in both price inflation and economic stagnation for years.
The solution is so far in the future that it will take a generation or two to die off first before it can be implemented, but nothing else will do: the separation of the Government and the Economy, in exactly the same way and for the same reasons as separation of Church and State. When such separations are not maintained, it leads to mutual corruption.
Hey people, these ideas are not new. They’ve been out there for decades. Just read some Austrian School economics like Ludwig von Mises. But even better, for the moral foundations for a free economy, read all the Ayn Rand you can lay your hands on.
hhead almost 16 years ago
to pshchearer I had an economics teacher that highly recommended Ayn Rand. I read Atlas Shrugged because of him and I liked it, too.