The Biggest Counterfeiter
The Mises Institute has a great article on the government’s fear of deflation. I’ve done a lot of thinking and writing about deflation and understood the mechanics if not the motives, until now.
“Why the hysteria against deflation? We are faced with a real puzzle here. In the whole of the private sector, the number one focus of retailers these days, particularly those dominant retailers such as Wal-Mart and Home Depot, is low prices. This they emphasize above all else because they know that this is what consumers want.
And yet in the public sector, we find exactly the opposite: an ironclad promise that prices will not be low but rather will be continually rising. So if Wal-Mart’s slogan is “Always Low Prices,” the slogan of the Fed and the government should be “Always Higher Prices.”"
The answer is (according to the libertarians) a damning condemnation of the motives behind inflation
“The reason the government ? and here I speak of Congress and the presidency ? favors a loose monetary policy, a discretionary rule at the Fed, and ongoing low-grade inflation is the most obvious one of all. It pays the bills. In other words, the reason is no different from that of private counterfeiting. They like to have money without having to work to get it. That is essentially what the Federal Reserve provides the government. It doesn’t have to worry about its bond rating collapsing or its credit standing falling. It doesn’t have to bother with taxing people. It can hide the costs of government in the complications associated with monetary affairs.”
Kurzweil’s latest book explains that deflation is inevitable due to the massive, accelerating productivity gains caused by technological progress. The Fed’s inflationary target then is rapidly diverging from the natural economic balance. They’re effectively sucking the productivity gains out of the economy and using it to expand the government. If you unwittingly receive a giant pay raise every year but your payroll taxes go up by exactly the same amount it’s possible you won’t even notice. And that’s exactly what our friendly government is banking on.
Big Media is fighting the rise of bloggers tooth and nail. It stands to reason that Big Government will fight the rise of peer to peer banking under the guise of stability in the not too distant future. This is the ultimate frustration. There are very smart people in charge that know 99% of the population will never question or bother to read about monetary policy or the Austrian School of economics and they rely on that ignorance. American politics today consists mainly of Socialists arguing with Intelligent Design proponents. Two theories debunked in 1871 and 1859 respectively.
The classical liberal in me wonders why a gold backed, open source currency combined with P2P Banking wouldn’t be possible. How do you use the market to beat the government monopoly on money?
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