Comments on: The Government Wrecks the Economy

By: Steve Consilvio

Steve Consilvio — Fri, 20 Jun 2008 00:35:33 +0000

“Inflation” is the rise in the price of goods and services. If I buy something for a dollar, and sell it for two dollars, I “create” inflation, although we usually describe it as “profit.” In other words, profit IS inflation.
The government must constantly create new money to keep up with the private economy, not vice-versa. Of course, the government is part of this cycle, too. Taxes is a form of profit (revenue) just like profits on goods or money (interest.) What do they all have in common? Buy Low – Sell High. “We all create inflation,” is a true statement, since we all need “revenue” which is a mathematical phenomenon, not just the physical movement of goods.
As the link I posted shows, the apple can move from point A to point Z just as easily regardless of the profit margin used. It is the math we use that creates inflation, not the government.

By: P.M.Lawrence

P.M.Lawrence — Wed, 18 Jun 2008 15:09:47 +0000

Steve Consilvio, what you link to describes inflationary pressure and not inflation as such. Inflation only occurs once more of the monetary medium is issued, "printing money". Some people argue that inflation is (rather than "occurs when") the US government releases certain financial instruments, but this is a misunderstanding at two levels:- - The USA isn't the only government in this game (so the description is only of how the USA does it), and it still could print money if it chose to (so the USA doesn't inherently do it that way, it's just a circumstance). - It's technically possible to issue the financial instruments and trigger institutional actions to cover them, and then you wouldn't get inflation after all. That's what used to happen in the 19th century, when governments sold bonds to bring bullion into their countries when there was a shortage. Interest rates shifted in response, and the governments had to balance their budgets so they had to retrench spending and/or raise taxes to match - but there was no inflation in the world economy. The key point is, things are set up so that releasing those financial instruments is connected so as to trigger more monetary medium being created. It causes inflation because of the set up, but in its own right it's actually an inflationary pressure. So, some inflationary pressures do cause inflation, but there has to be something in the set up to make that flow through. You can imagine a country with statutory institutions that respond to, say, CPI changes to give public servants pay rises and issue monetary medium in step. In a country like that, yes, the things you link to would indeed cause inflation, but only because of the added circumstance that sets up a trigger connection. They are not inherently inflationary in their own right. Other things being equal, the inflation is self correcting as one price rise means a shortage of monetary medium elsewhere in the system, as the total monetary medium is what mathematicians call an invariant.

By: Brian Gladish

Brian Gladish — Wed, 18 Jun 2008 08:01:44 +0000

Steve,

A quick read of Rothbard’s What Has Government Done to Our Money would help you a lot.

Then you might think about whether or not you would ever see an orange without the people in the middle who get it to you, for a profit, from California and Florida.

There’s a lot more, but that would be a start. However, if you choose not to investigate you will make a consumate politician.

By: fundamentalist

fundamentalist — Wed, 18 Jun 2008 06:31:13 +0000

Steve: “…we all create it, not just the government.”

Actually, there are some important laws in economics that prevent the process described in your link from happening. That process might work for individual goods over short periods of time, but it would not create a general price increase over a year or more. Only increases in the money supply by the Feds can do that.

By: Steve Consilvio

Steve Consilvio — Wed, 18 Jun 2008 05:20:23 +0000

So the big question is: where does inflation come from?
The answer is obvious: we all create it, not just the government.
You may find this interesting:
http://www.behappyandfree.com/Home/story.html
When the system is a vicious circle, everyone is to blame, regardless of where they are in the circle; or nobody is to blame. Follow the math!

By: Fephisto

Fephisto — Sun, 15 Jun 2008 05:02:43 +0000

*face-palm*

When did the U.S. become a latin-American country?