Comments on: Where Does Inflation Come From? http://www.cdobs.com/archive/our-columns/where-does-inflation-come-from/ Thu, 09 Feb 2012 03:41:30 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: jmrowland http://www.cdobs.com/archive/our-columns/where-does-inflation-come-from/comment-page-1/#comment-50637 jmrowland Wed, 25 Jan 2012 21:31:45 +0000 http://www.cdobs.com/archive/our-columns/where-does-inflation-come-from,1348#comment-50637 All this explanation, yet we still don't understand inflation. Clearly, if a bank were to create more paper money today and give it to me, I would be able to spend it. I would know, and the bank would know that it was created out of whole cloth and, according to the theory of inflation, "worthless." Yet, I would still be able to take this pile of money out of the bank and go down the street and exchange it, immediately, for goods and services. I could even invest it with another? the same? bank and use it to "earn" more money. I would continue to be able to do this for some time to come... and then, the orthodoxy goes, it will "catch up" to me, and at some point, I will have to spend more of this free money in order to obtain the same amount of goods or services. There's clearly a time gap involved, and this gap is where we experience inflation. But what is the gap? How long before my new money goes bad and its worth begins to decline? And how fast does it decline? Is it a function of time, or is it a function of how many hands it passes through? ...and if the latter, how many hands? ...and whose? What is the "mechanism," always hinted at but never stated, by which the total amount of goods and services is compared against the total amount of available cash and one of them is found to be too little or too much for the other? If you answer "the marketplace," I must respectfully respond, "Untrue," for, as I've already demonstrated, the marketplace is rather easily fooled. The marketplace will continue to cheerfully accept my worthless cash. Until somebody tells them it's worthless. Somebody they will believe. More to the point, how many individuals and institutions are already taking advantage of this gap right now, are in the business of mining the gap, concentrating wealth for themselves at the expense of inflation for the economy as a whole? All this explanation, yet we still don’t understand inflation.

Clearly, if a bank were to create more paper money today and give it to me, I would be able to spend it. I would know, and the bank would know that it was created out of whole cloth and, according to the theory of inflation, “worthless.”

Yet, I would still be able to take this pile of money out of the bank and go down the street and exchange it, immediately, for goods and services. I could even invest it with another? the same? bank and use it to “earn” more money. I would continue to be able to do this for some time to come… and then, the orthodoxy goes, it will “catch up” to me, and at some point, I will have to spend more of this free money in order to obtain the same amount of goods or services.

There’s clearly a time gap involved, and this gap is where we experience inflation. But what is the gap? How long before my new money goes bad and its worth begins to decline? And how fast does it decline? Is it a function of time, or is it a function of how many hands it passes through? …and if the latter, how many hands? …and whose?

What is the “mechanism,” always hinted at but never stated, by which the total amount of goods and services is compared against the total amount of available cash and one of them is found to be too little or too much for the other? If you answer “the marketplace,” I must respectfully respond, “Untrue,” for, as I’ve already demonstrated, the marketplace is rather easily fooled. The marketplace will continue to cheerfully accept my worthless cash. Until somebody tells them it’s worthless. Somebody they will believe.

More to the point, how many individuals and institutions are already taking advantage of this gap right now, are in the business of mining the gap, concentrating wealth for themselves at the expense of inflation for the economy as a whole?

]]> By: timjowers http://www.cdobs.com/archive/our-columns/where-does-inflation-come-from/comment-page-1/#comment-2302 timjowers Wed, 30 Nov -0001 00:00:00 +0000 http://www.cdobs.com/archive/our-columns/where-does-inflation-come-from,1348#comment-2302 Totally agree. Inflation is simply a way to steal from the savers. It worked OK for America for a few decades because they were stealing from the future generations and from the workers in China and other places. Today? The compounding problem means they cannot inflate enough to feed the debt monster. Its simple math: exponential growth cannot continue without a bust. In this case, the FED is trying to hyper-inflate (if you had dollars you lost 15% or so each year) in order to fund government excesses and make the bankers rich. But, overall, it was stealing from the middle class for the last two decades and now must expand to steal from the lower class too (aka commodity price inflation). It simply shows the FED does not work for the American people but for bankers and government over-spenders. The FED and US Government engineer inflation. Deflation is normal in a scientifically advancing and business improving society. Inflation is a tool to create poverty from work. It is a tool to steal what has been given (steal pay after payment has been made!) Totally agree. Inflation is simply a way to steal from the savers. It worked OK for America for a few decades because they were stealing from the future generations and from the workers in China and other places. Today? The compounding problem means they cannot inflate enough to feed the debt monster. Its simple math: exponential growth cannot continue without a bust. In this case, the FED is trying to hyper-inflate (if you had dollars you lost 15% or so each year) in order to fund government excesses and make the bankers rich. But, overall, it was stealing from the middle class for the last two decades and now must expand to steal from the lower class too (aka commodity price inflation). It simply shows the FED does not work for the American people but for bankers and government over-spenders.

The FED and US Government engineer inflation. Deflation is normal in a scientifically advancing and business improving society. Inflation is a tool to create poverty from work. It is a tool to steal what has been given (steal pay after payment has been made!)

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